Hedge raked in millions betting on bank crash

Date: Friday, January 23, 2009
Author: The Guardian

One of London's most successful hedge funds has made £12m in just four days by betting on a fall in the Barclays share price, a move that will heighten the controversy over so-called short-selling strategies.

Lansdowne Partners, which also profited from the fall in the share price of Northern Rock at the height of its problems, sold Barclays shares last Friday - when the bank lost almost a quarter of its value in frenzied trading - and bought them back again on Wednesday after they had fallen by almost £1.

The disclosure is likely to fuel the row between politicians and the Financial Services Authority which lifted a ban on short-selling last Friday. The ban was introduced last September to try to protect the share price of HBOS which was in the throes of a rescue takeover by Lloyds.

While bank shares, particularly those of Barclays, Royal Bank of Scotland and the newly formed Lloyds Banking Group, have been savaged since the ban was lifted, the FSA insisted yesterday that short-sellers were not to blame