A pair of hedge funds owned by prominent Brexit supporters have made significant bets against companies exposed to the British consumer including big high street names.
Odey Asset Management, part-owned by Crispin Odey, and Marshall Wace, part-owned by Sir Paul Marshall, have declared short positions against consumer-exposed companies, including retailers, estate agents and banks, equivalent to £149m and £572m respectively – as rising political uncertainty threatens the economy.
The retail sector is facing particular scrutiny from short sellers, who in effect wager significant sums on certain shares falling in value. Uncertainty among consumers, with the Brexit process reaching a crunch point, comes at a time when retailers are already struggling to adjust to the move from physical shops to online.
The hedge fund run by Odey, one of the most outspoken of the Brexit-backing hedge fund managers, holds a short position in Intu – the owner of shopping malls including the Trafford Centre in Greater Manchester – that represented £33m worth of shares in the company at the end of last week. He also holds a position against struggling department store Debenhams that is worth £5.3m. The firm also appears to be betting that Britons’ appetite for cars will fall, in line with surveys showing hesitation over big-ticket purchases. The firm has short positions against Lookers, a large dealership chain, and Auto Trader, the online used-car directory.
In total, his hedge fund, with headquarters in Mayfair, has taken out £436m worth of declared short positions against British companies, of which nearly £150m are consumer-facing entities.
At the same time, Marshall Wace, one of the UK’s largest hedge funds with $35bn (£27bn) in assets under management, holds declarable short positions equivalent to just under £1.4bn – more than any other investor in Britain.
Marshall Wace also has retail and other consumer-facing businesses in its sights. It has borrowed 2.92% of Marks and Spencer’s shares, a short position equivalent to £134m of the value of M&S. Marshall Wace companies have also taken short positions against Debenhams, Intu, B&Q owner Kingfisher, Dunelm Group, and Superdry. Marshall gave £100,000 to Vote Leave. The other co-founder, Ian Wace, gave £100,000 to the remain campaign.
Marshall Wace has 47 declared short positions in UK firms, the highest concentration of any European country, according to Breakout Point, an investment data firm.
Marshall Wace has also bulked up its Dublin operations, where it has received fund management licences, as a protection against the risk of being prevented from servicing EU clients after Brexit.
Investors are not required to publicly report their short positions on currencies or bonds, but Brexit has also provided the opportunity to profit from falls in the value of the pound and lower demand for British government debt.
In August Odey, who made an estimated £220m overnight in the immediate aftermath of the Brexit vote, said he was betting against sterling to fall as far as $1.21 against the US dollar. So far the pound’s low point this year was just below $1.27. Odey also had short positions on UK government bonds, he told Reuters recently.
Other leave campaign donors have taken more political approaches since the vote.
Jeremy Hosking, one of the co-founders of the Marathon hedge fund who now runs Hosking Partners, invests in company stocks around the world. Hosking donated more than £1.5m to Brexit-related organisations, including Vote Leave.
Before the 2017 general election Hosking pledged to fund a campaign to unseat pro-remain MPs. At the time he said he wanted an “army” of Brexit-backing MPs to support the prime minister, Theresa May. However, Hosking indicated he preferred a “full, national Brexit”, rather than a “City of London Brexit”. His former colleagues in Marathon – in which Hosking still holds a financial interest – appeared to be less pleased with the Brexit vote. In its annual results for 2017 Marathon said its underperformance against its benchmarks was “mainly due to the effect of Brexit”.
Peter Hargreaves, the retired founder of retail stockbroking platform Hargreaves Lansdown, was the second-biggest biggest donor to leave campaigns, giving £3.2m to the Leave.EU organisation fronted by Nigel Farage. Hargreaves is now a backer of Blue Whale Capital, a fund that gained a 24% return in its first year, thanks in part to its focus on US rather than UK investments. Hargreaves has backed a no-deal Brexit, saying he would “guarantee my entire wealth that we would get free trade” in the aftermath.
Other prominent business backers of the leave campaign have taken a lower profile since the vote, including Peter Cruddas, the founder of spreadbetting firm CMC Markets, which could benefit from market uncertainty as clients trade more. Sir Michael Hintze, the founder of hedge fund CQS, donated £100,000 to Vote Leave, where his son worked as a researcher. Hintze and the other businessmen named declined to comment.