LONDON Dec 12 Lansdowne Partners, a European
hedge fund which made millions betting against UK banks in the
financial crisis, is starting to see the benefits of sticking
with a big position in Lloyds Banking Group Plc.
Its flagship $7.5 billion Developed Markets fund is up 14.21
percent this year, according to a letter sent to clients and
obtained by Reuters, aided by a recovery in Lloyds shares.
Last year Lansdowne's holding in the lender cost it dearly,
with the Developed Markets fund losing a fifth of its value,
dragged down by a 60 percent slump in Lloyds' share price.
The hedge fund was among those heavily criticised for
betting against UK banks, including Barclays Plc and
later-nationalised Northern Rock, at the height of the financial
But since then, the Developed Markets fund, co-managed by
Stuart Roden and Peter Davies, has invested billions backing
banks including JPMorgan Chase & Co and Wells Fargo & Co
, and emerged as one of the biggest shareholders in
Lloyds behind the UK government.
The monthly note said Lloyds had benefited from strong
earnings and the "sense that banking regulation will take on a
more pragmatic tone", following Mark Carney's appointment as
head of the Bank of England and publication of the central
bank's Financial Stability Report.
After a 10 percent rise in November, Lloyds shares are now
up 72 percent in 2012, but are still below their 2010 levels
when Lansdowne's holding emerged.
Roden and Davies also took advantage of a November sell-off
in U.S. stocks to add to U.S. bank positions, the letter showed.
They did not name the banks, but according to recent filings
with U.S. regulators in the third quarter the fund owned stakes
in JP Morgan and Wells Fargo, currently valued at more than $660
million and $440 million respectively.
In contrast to its big positions in banks with large retail
franchises, last year Lansdowne sold out of a $850 million
holding in investment bank Goldman Sachs Group Inc.
Roden and Davies also said markets in the United States had
overplayed worries about how the country will tackle its
ballooning deficit, known as the "fiscal cliff".
"While we remain cognisant of the need for a successful
resolution to this issue, we were slightly surprised by markets'
weakness and used it as an opportunity to increase selectively
the Fund's net exposure," they wrote.
The fund benefited from owning Nike Inc, Diageo Plc
and Ryanair Holdings Plc in November, as well as
shorting - betting against - an unnamed U.S. retail stock, the
Overall the fund has a net long position - of 37.4 percent -
in North America, a 12.3 percent net long on UK stocks and a 6.2
percent net short on the rest of Europe.
Lansdowne manages $12 billion in assets and was founded by
Steven Heinz and UK Conservative Party donor Paul Ruddock in
1998. The firm declined to comment.