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Marshall Wace and Millennium positioned to profit from Close Brothers’ woes

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Hedge fund majors Marshall Wace and Millennium Management are both likely to have profited from the recent sharp fall in Close Brothers’s share price, having held “significant” short positions in the beleaguered merchant bank, according to a report by The Times.

The report cites regulatory filings with the Financial Conduct Authority as revealing the hedge funds’ wagers against Close Brothers, which also scrapped its dividend last week.

Shares in Close Brothers have plunged by around 50% since 11 January when the FCA revealed an investigation into the car loans market, which accounts for around 20% of the bank’s £1.95bn loan book.

On Thursday, Close Brothers moved to bolster its capital position by announcing the cancellation of its dividend payments this year, which prompted a 22.5% slump in its share price on that day alone, with the stock then falling by an additional 3% on Friday.

Prior to the announcement of the FCA review, Close Brothers had a stock market valuation £1.2bn, with its market capitalisation now standing at just £450.

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