January 31, 2018 / 4:31 PM / a year ago

CapeView, AQR among hedge funds winners from Capita share slide

* Capita stock down more than 45 pct

* Only three fund firms had short positions above 0.5 pct

* Computer trading firm AQR the biggest winner

By Simon Jessop and Maiya Keidan

LONDON, Jan 31 (Reuters) - A steep fall in British outsourcer Capita’s share price on Wednesday provided a windfall for a small group of hedge funds, including CapeView Capital and computer-driven investor AQR Capital.

Capita’s stock fell more than 45 percent after its chief executive warned on 2018 profit and announced a wide-ranging plan to shore up the company’s finances, in the wake of the collapse of heavily indebted sector peer Carillion.

Despite struggling to recover after a string of similar warnings in late 2016 that had kicked off a more than 60 percent fall in its share price, just three asset managers still had large so-called “short” bets that the price would fall further.

Under the trade, a hedge fund borrows the stock of a company from a long-term holder, such as a pension fund, before selling it into the market. The fund then buys the shares back at a later date and returns them, hopefully pocketing a profit.

Heading into Wednesday, just CapeView, AQR and Henderson Global Investors had short positions totalling more than 0.5 percent of Capita’s stock, the level above which Britain’s Financial Conduct Authority demands disclosure.

The biggest winner was U.S.-based computer-driven investor AQR Capital Management, which had a 2.91 percent short position, the data showed. As of 1525 GMT, its paper profit stood at 30.5 million pounds ($43.36 million), Reuters calculations showed.

London-based CapeView, meanwhile, had a 0.61 percent short position and Henderson 0.52 percent, the data showed, making them paper profits of 6.4 million pounds and 5.5 million pounds, respectively, Reuters calculations showed.

AQR and CapeView declined to comment when contacted by Reuters while Henderson did not immediately respond to a request for comment.

It is not known how many funds had short positions below the 0.5 percent threshold for disclosure, but in total, just over 32 million shares of the company’s 660.41 million issued shares were out on loan, data from Astec Analytics showed.

The shares actually being used by hedge funds accounted for around a fifth of those which had been put up for loan, the data showed. ($1 = 0.7035 pounds)

Reporting by Simon Jessop; Editing by Alison Williams

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below