Hedge fund giant Marshall Wace takes big stake in IAG as airline industry faces “worst crisis”

Passenger jet on take-off

Marshall Wace, the long-running high-profile hedge fund set up by Sir Paul Marshall and Ian Wace, has taken a 3 per cent share in IAG, the owner of British Airways, Iberia, and Aer Lingus, in a reported bargain swoop for stocks and sectors hit hard by the coronavirus pandemic.

The London-based long/short hedge fund giant’s stake – estimated at around GBP140 million (USD181.3 million) – comes after BA earlier this week replaced its chief executive Alex Cruz with Aer Lingus chairman and CEO Sean Doyle, amid what IAG chairman Luis Gallego described as the “worst crisis faced in our industry.”

The coronavirus crisis has formed the backdrop to a series of key bets made by Marshall Wace against the global travel and aviation sectors this year, including sizeable shorts in Deutsche Lufthansa and Air France.

Earlier in the year, the firm - which was established in 1997 and today manages around USD48 billion - placed negative wagers on TUI AG, the Anglo-German travel and tourism staple, and low-cost carrier EasyJet, which has long been one of most heavily-shorted European airline stocks even before Covid-19.

Now, Marshall Wace’s new 3 per cent position in IAG suggests the firm sees value in UK stocks, and money to be made as share prices tumble, UK press reports said on Thursday.

IAG proved one of the most profitable positions for hedge fund short sellers last month, generating an estimated GBP168.8 million (USD218.6 million), according to analysis by London-based equity research firm Ortex Analytics. 

Bets against major airlines and package holiday groups earlier fuelled returns for short sellers in July as coronavirus put European summer vacation plans on ice, with IAG, Lufthansa, and TUI bringing in a total of EUR191 million (USD223.8 million) for bearish managers, Ortex said.

IAG’s share price stood at 93.80 on Thursday morning, down from 104.00 on Monday (12 October).