Hedge fund short sellers suffer USD500m hit in August from wayward FTSE 100 wagers

Investment losses

Hedge funds have lost almost USD560 million after several hefty short bets on a range of FTSE 100 stocks turned sour as equity markets yielded solid gains.

New data from London-based equity research firm Ortex Analytics shows almost three-quarters of total short losses in August came from big wagers against just five names: Ocado Group, InterContinental Hotels, International Consolidated Airlines Group, BHP and Pearson.

Together, they accounted for a bruising GBP310 million loss out of a total hit of GBP420 million to hedge fund short sellers last month.

As UK equities gained ground towards the end of the summer, hedge funds made gains from short positions in just a third of FTSE 100 names - 32 companies out of the total 100 in the index – as negative wagers in all sectors ultimately went awry.

Hargreaves Lansdown proved the most profitable target for short sellers, delivering GBP26 million in August, followed by the National Grid (GBP17.6 million), HSBC (GBP16.2 million), and Royal Dutch Shell (GBP15.1 million).

On the flipside, Ocado brought the biggest hit for hedge fund shorting London-listed firms, losing some GBP79.5 million, according to Ortex metrics ranking the UK’s blue-chip index by short profit. 

BHP Group – which lost more than GBP67 million for short-selling hedge funds - was the FTSE 100’s most shorted stock in August, followed by Royal Dutch Shell, Just Eat, Ocado Group and Pearson.

“The FTSE 100 is often seen as a bellwether for investor confidence and understanding the interplay between share price performance and short profit gives a perspective on who is winning in the battle between the bulls and the bears,” Peter Hillerberg, co-founder of Ortex Analytics, said.

“For August, we’ve seen a number of big trades turn sour for short sellers driving heavy cumulative losses, but as we’ve seen so many times throughout the pandemic, the pendulum can quickly swing the other way and it wouldn’t be a surprise to see a reversal of fortunes next month.”