Hedge funds build positions in crisis-hit bank Monte dei Paschi

City A.M. Reporter
BIG-NAME London hedge funds Odey Asset Management and Egerton Capital are among those upping their bets against Monte dei Paschi di Siena in recent days, after revelations the troubled Italian bank faces heavy losses.

Italy’s third-biggest bank is under investigation for an opaque series of derivatives and structured finance contracts between 2007 and 2009 that could cost it €720m (£625.9m).

The scandal surrounding the world’s oldest bank, which is already in need of a €3.9bn state bailout, has become a campaign issue three weeks before Italy holds national elections.

Shares in Monte Paschi are now the most in demand in Italy’s FTSE MIB blue-chip index for short-selling by hedge funds, with 75 per cent of those of its shares available to borrow – the “lending pool” supplied by institutional invstors – now out on loan, according to data group Markit.

Prime brokers, who provide finance and lend stock to hedge funds, have had to meet some of the demand for shares in the 540-year-old Tuscan lender from their own supplies, such has been the interest from short-sellers.

Egerton took a short position of 0.68 per cent of Monte Paschi on 24 January, according to the website of Italian regulator Consob, and had increased this to 0.97 per cent by Friday.

Meanwhile Odey took a position of 0.57 per cent on 24 January.