High street in hedge fund crosshairs after retail meltdown

Michael Bow
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HEDGE fund managers are betting millions of pounds on a gloomier UK high street this year after figures yesterday showed a sharp spike in the shorting of some of Britain’s biggest retail names.

Hedge fund borrowings are used as a proxy for bets against companies – those for high street stalwart WH Smith, electrical giant Dixons Retail and department store Debenhams all leapt in January as investors digested a torrid start to the year for the high street, which saw HMV, Jessops and Blockbuster all fall into administration.

Short positions against WH Smith – now the most shorted stock on the FTSE – have surged 63 per cent in the past four weeks, while Dixons increased close to 45 per cent and Halfords almost 90 per cent, according to figures from data supplier Markit.

The average amount of retail stocks out on loan among those listed on the FTSE All Share has now hit 3.72 per cent – more than three times over the FTSE average.

Further data from the UK Financial Services Authority collated last week shows several hedge funds, including secretive investor Fest NV, and two New York firms, Merchants’ Gate Capital and Eminence Capital, all upping their bets against WH Smith over the last month, with Fest borrowing almost four per cent of the firm’s entire share capital. Dixons Retail has also seen increased short interest from Fest and Lone Pine Capital, according to the FSA data.