Investors hedge their bets on America's biggest banks

Date: Wednesday, August 17, 2011
Author: Louise Armitstead, The Telegraph

Two hedge funds that made billions predicting the financial crisis have taken opposing bets on Americas biggest banks

Paulson & Co, the New York-based fund which made $15bn betting against the US housing market in 2008, has sold 63.2m shares in Bank of America.

The sale has halved the group's stake in America's biggest lender to 60.4m shares, according to a filing with the Securities and Exchange Commission.

The filing also showed that the group, managed by the billionaire John Paulson who has been betting on economic recovery by the end of next year, boosted his position in Wells Fargo from 20.5m to 33.6m shares over the past quarter.

Lansdowne Partners, the biggest hedge fund in Europe which predicted the collapse of the British lender Northern Rock, has made the opposite moves.

Filings show that London-based hedge fund bought 5.1m shares - or a $38.1m stake - in Bank of America. It also cut its holding in Wells Fargo by 3.7m shares to 28.3m shares and halved its stake in JP Morgan to 7.1m shares.

Lansdowne has been hit this year by its bets on British banks, among them Lloyds Banking Group which has plunged by 50pc in value this year.

Bank of America shares have plunged by around 46pc this year amid fears that it will have to tap investors for a big capital raising as a result of failing mortgages. Wells Fargo and JP Morgan have performed better, falling 22pc and 15pc respectively.

Financial companies posted the worst performance among 10 industry groups in the Standard & Poor's 500 Index in the second quarter, losing 6.3pc.