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Hedge funds target UK banks as Brexit deadline looms

One of those shorting UK banking stocks is Marshall Wace - founded by the father of Mumford & Sons’ lead guitarist, Winston Marshall

steve carrell
Steve Eisman was played by Steve Carrell in The Big Short

UK banks are being targeted by a London hedge fund founded by Paul Marshall, the father of Mumford & Sons’ lead guitarist, Winston.

Marshall Wace has short positions in both Metro Bank PLC (LON:MTRO) and CYBG PLC (LON:CYBG), the parent company of Clydesdale Bank, Yorkshire Bank and, of late, Virgin Money.

READ: CYBG completes £1.7bn takeover of Virgin Money

Unlike the usual ‘long’ investment, where investors make money if a stock does well, being ‘short’ is effectively a bet that a company’s value will fall.

Metro Bank is the most heavily shorted UK banking stock, according to shorttracker.co.uk. At least 7.0% of its shares are in the hands of funds and investors that want its share price to drop.

Alongside Marshall Wace, another London-based hedge fund, Odey Asset Management, also has a bearish view on the stock.

As for CYBG, at least 2.8% of its shares are out on loan, with US investment management giant Wellington Management Group one of those betting big on a fall in value.

The Big Short

Prominent US investor Steve Eisman, who made millions from the 2008 financial crash and was the inspiration for one of the characters in The Big Short, also has a dislike for UK-focused banks.

He thinks Parliament will reject any Brexit deal agreed between the government and the European Union, which could lead to “Trotskyite” Jeremy Corbyn coming to power.

He’s shorting two UK banking stocks which he declined to name, but has a list of 50 other British companies which he is taking a close look at.

“I might short all 50 if I think Jeremy Corbyn is going to be prime minister. Corbyn’s a Trotskyite. Now I know my Trotskyites well and I know you don’t want to be invested in the UK if a Trotskyite is prime minister.” The comments were reported by Bloomberg News.

Quick facts: Virgin Money UK PLC

Price: 181.75 GBX

LSE:VMUK
Market: LSE
Market Cap: £2.61 billion
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