Multi-strategy major Millennium Management and Boston-based systematic global equity manager Arrowstreet Capital are among a number of hedge funds shorting the assets of UK water companies, after a crisis at Thames Water highlighted high debt levels across the industry, according to a report by Bloomberg.
According to regulatory filings, Millennium holds a short position on United Utilities Group, which provides water and wastewater services in northwest England, while ArrowStreet has a short position on Pennon Group, which owns three water utilities in southwest England.
The report cites unnamed sources as revealing that the debt of water utilities including Southern Water Services Finance and Yorkshire Water Finance have also been targeted.
Thames Water is currently struggling to raise equity amid a standoff between shareholders and industry regulator Ofwat, which led to a default at the firm’s parent company earlier this month. The crisis may deepen further should the UK government decide to bring the business under special administration, potentially triggering a further fall in confidence across the wider industry.
According to a stat compiled by S&P Global Market intelligence, short interest on United Utilities jumped to almost 7% on April 12 from 2% in July last year, but has since eased to 5.3%. Short interest in Southern Water bonds meanwhile, jumped this week, with 6.6% of the notes maturing in May 2028 now out on loan, up from around 0.8% at the start of the year.
