Marshall Wace was the biggest winner in one of the most popular recent trades among hedge funds, with its bet on Carillion landing it a profit on paper of 19.1 million pounds in just three days. Funds including Marshall Wace have waited months for Carillion's value to fall, finally hitting the jackpot when the support services and construction company's stock slid almost 63 percent between Friday's close and Wednesday.
A profit warning from Carillion over customer payments owed that it could no longer expect it would be able to collect led to a 845 million pound ($1.1 billion) writedown, prompted its boss to quit and triggered worries about a rights issue. The stock, which was the most heavily shorted on the London market, ended the prior week at 192 pence.
The "short" trade by Marshall Wace and others involves borrowing Carillion shares and selling them on into the market in the expectation the price will fall, at which point they can be bought back and returned at a profit. Of 17 outstanding shorts against Carillion as of Wednesday at 0900 GMT, Marshall Wace held the largest position at 3.7 percent of the company's outstanding stock, data from the Financial Conduct Authority showed.
That means the hedge fund run by Paul Marshall and Ian Wace could have made 19.1 million pounds over the past three days across its TOPS computer-driven and Global Opportunities funds if they have held onto their stake. BlackRock Investment Management enjoyed the next-biggest return on paper over the same time period, more than 16 million pounds across several funds. Other funds belonging to the US fund giant collectively hold 32 million shares betting on a price rise, Thomson Reuters data showed.
Fellow London-based hedge funds set to reap the rewards of the fall include Thunderbird Partners - launched with $1.5 billion in spring 2015 - whose gains would be 14.5 million pounds, and Michael Sidhom's Immersion Capital, which could make 11.4 million pounds. Spokesmen for both declined to comment. Naya Capital, meanwhile, made 7.6 million pounds. A spokesman at London-based Naya declined to comment.
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