Hedge Fund Lansdowne Partners' Short Positions

Today we're examining short positions in UK financial companies taken by Steven Heinz and Paul Ruddock's hedge fund Lansdowne Partners. Currently, they have four shorts in Old Mutual (OML), Legal & General (LGEN), Prudential Plc (PRU), and Aviva (AV). Kindly note that Prudential is a company based in the UK, not to be confused with the US company of the same name.

Over the last few months, we've highlighted Lansdowne's short position in Prudential several times during the period where Prudential attempted to buy AIG's Asian business arm, AIA. This position has received a lot of attention from the financial media as many argued Prudential was overpaying for AIA. Lansdowne's short thesis seems to extend beyond the AIA bid though, because they held the position many months before the bid was even made and they have not completely covered their short even after Prudential's bid failed.

Currently, Lansdowne's short of Prudential Plc stands at -1.18% of shares outstanding. They previously were short to the tune of -1.46% of shares back on May 5th, 2010 so they have covered a partial position but still maintain quite a hefty bet. As you'll see from our examination of Heinz and Ruddock's other shorts, Lansdowne tend to hold their shorts for longer periods of time.

All of the short positions listed below are currently still open. Disclosure rules on short positions in UK financial companies state that fund managers who are net short a UK financial sector company are required to disclose the position if it is greater than 0.25% of the firm's issued share capital. In addition, the hedge fund must disclose each time it increases the short by 0.1% of issued share capital. Also, they must disclose when the position falls below the 0.25% threshold. For a full list of companies deemed 'financial sector companies,' head to the FSA website.

While these regulations are obviously tedious for the hedge funds themselves, it's a prime example of how UK governing bodies are increasing regulation and it's interesting to compare it to the SEC's requirements. The UK is more 'fun' for Market Folly because it reveals short positions of various hedge funds and we get to highlight these positions. In the United States, these positions are closely guarded and rarely revealed so it will be intriguing to see if the SEC steps up regulatory requirements regarding public disclosure of short positions. Over a year ago, we highlighted how rampant public disclosure of short positions could possibly be a bad idea. But at the same time, increased regulation is definitely needed so maybe a compromise would be revealing shorts to the governing bodies, but not releasing them publicly. That is an entirely separate debate that we'll save for another time.

Turning back to hedge fund Lansdowne Partners' short positions, we see that they have been short the insurance company Legal and General for well over a year. This is not the first time this company has appeared in our hedge fund portfolio tracking series either. Back in May, we saw that Ken Griffin's investment firm Citadel was short Legal and General as well. Since then though, Citadel have reduced the position under the 0.25% threshold. Below are tables breaking down Lansdowne's various short positions:

Legal & General (LGEN)
February 6th, 2009: Lansdowne was short -0.47% of shares
August 26th, 2009: They increased their short to -1.16%
November 12th, 2009: Increased to -1.76%
June 11th, 2010: Reported as -1.02%

Old Mutual (OML)
February 18th, 2009: Lansdowne was short -0.39% of shares
April 20th, 2009: -0.75%
May 7th, 2009: -0.51%
October 13th, 2009: -0.41%
November 27th, 2009: -0.49%

Prudential Plc (PRU)
May 22nd, 2009: -0.95%
December 10th, 2009: -0.79%
December 15th, 2009: -0.43%
April 26th, 2010: -0.97%
May 5th, 2010: -1.46%
May 28th, 2010: -1.18%

Aviva (AV)
February 13th, 2009: -0.34%
March 26th, 2010: fell below the 0.25% threshold
June 11th, 2010: -0.49%

So, after previously covering the majority of their short in Aviva back in March, Lansdowne has re-shorted the name. And, as you can tell from above, Lansdowne typically holds their core short positions for an extensive period of time, trading around partial positions in the mean time.

Last month, Lansdowne's UK Equity Fund was -3.98% for May but still up 0.67% for the year as detailed in our May hedge fund performance update. You can view our coverage of Lansdowne's new longs here as well as our posts on other hedge fund UK positions.

Hedge Fund Lansdowne Partners Discloses Short Position

UK based hedge fund Lansdowne Partners has re-opened their short position in British life assurer Prudential Plc (LON:PRU). The hedge fund's bet represents -0.32% of Prudential's outstanding stock, approximately £47 million worth. This is not the first time they've been short Prudential as they previously had a larger short position in this name back in December. Prudential Plc is expected to disclose details of their $20 billion capital raise to finance a $35.5 billion acquisition of AIA, the Asian insurance division of AIG. Please keep in mind that the company referenced above (UK based Prudential) has no ownership link with Prudential of America, a company the majority of you will be familiar with that trades under the ticker PRU on the NYSE. Make sure you don't confuse them.

Lansdowne found success on the short side of their portfolio during the financial crisis as they profited off their shorts in Northern Rock and Barclays. But then again, almost all hedge funds had some sort of success with their shorts back then. For more details on on the disclosure rules for long and short holdings in UK companies see our UK primer here.

Lansdowne of course have constantly been rated as one of the top hedge funds in London and they specialize in long/short stockpicking (although they also employ other strategies as well). Their UK Equity fund was up 8.28% through the end of March as noted in our first quarter hedge fund performance numbers. Late last year we saw that their flagship fund has returned 19.37% annualized since 2001 when we took a look at Lansdowne's portfolio and saw they favored large caps in developed countries.

Taken from Google Finance, Prudential is "a financial services company. The Company has operations in the United States, Asia, Europe and Latin America. Through its subsidiaries, it offers products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services."