Three overseas hedge funds have made profits of €135 million over the last two months from betting on the collapse in Irish banking shares.
The funds, based in New York and London, made gains of €85 million by short-selling shares in Anglo Irish Bank, €30 million from holding a short position in Bank of Ireland, and €19 million from shorting Irish Life and Permanent, according to information contained in stock exchange filings.
New York-based Tiger Global Management was the biggest winner from shorting Irish banks, with successful bets that shares in each of the three banks would fall. Funds managed by Tiger recorded a total gain over the past two months of €72 million.
Calypso Capital Management, also based in New York, made profits of €14 million from continuing to hold a short position in Anglo Irish Bank, while London-based Lansdowne Partners made gains of €48 million also by shorting Anglo.
The gains made by each fund are based on disclosures to the stock exchange, which have been compulsory since the Financial Regulator banned short-selling of Irish shares in late September.
Although taking a short position in Irish financial stocks has been illegal since then, investors that already held such positions were allowed to maintain them once they agreed to disclose their positions on a daily basis. They were, however, prohibited from adding to their positions.
The lack of a disclosure requirement prior to the end of September means it is likely that the total gains racked up by each fund could be even higher, depending on when they initially took their positions and the prevailing share price of each bank at the time.
The three fund managers have yet to cash in their gains; their positions remained intact as of last week. A number of other hedge funds, including Adelphi Capital Partners, Blue Ridge Capital and Kynikos, closed out their short positions last month, within weeks of the introduction of the new disclosure regime and the ban on short-selling of banking stocks.
Tiger, Lansdowne and Calypso, however, have benefited from further steep falls in Irish banking shares in recent weeks. Anglo Irish Bank shares have fallen 80 per cent since the new disclosure regime came into effect on September 22.
Bank of Ireland closed on Friday 73 per cent off its September 22 price, despite disclosing on Friday that it had received preliminary approaches from a number of outside investors seeking to take a stake in the company. Irish Life and Permanent closed on Friday 79 per cent off its price of September 22.
