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Hedge funds short German lender with US real estate exposure

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Multi-strat major Millennium Management, and Qube Research & Technologies, one of London’s biggest computer-driven hedge fund firms, are betting against German mortgage lender Deutsche Pfandbriefbank (PBB) because of its exposure to the troubled US commercial real estate market, according to a report by the Financial Times.

The report cites data from S&P Global Market Intelligence as revealing that short interest in the bank, which has market value of €511m, hit a record high of 17% last week and is now just below those levels, compared with just 1% early last year.

Other hedge funds to bet against the bank include Wellington Management, Caius Capital and Kite Lake Capital, according to regulatory filings.

Earlier this month PBB warned it was facing the biggest crisis in the real estate sector since 2008, prompting a sell-off in its shares and bonds despite assurances that capital ratios remain “well above” regulatory requirements. The bank’s stock is now down 39% so far in 2024.

PBB’s troubles stem from its outsized exposure to the ailing US commercial real estate sector which has been hit by big falls in the values of perviously prime property locations.

In recent weeks, Japanese bank Aozora, Deutsche Bank and New York Community Bancorp have also all indicated potentially large losses due to their exposure to the US office market.

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