Short sellers target Hargreaves Lansdown, SJP over Woodford - FT

Short sellers have targeted financial service providers Hargreaves Lansdown and St James’s Place (SJP) as the duo are scrutinised for close links with scandal-hit fund manager Neil Woodford, the Financial Times reported.

Hedge funds have shorted 7.4% of SJP stock, making it the sixth most bet- against company in the FTSE 100, according to figures from data company IHS Markit cited by the newspaper.

Short positions in Hargreaves are equivalent to 6.2% of its stock, putting it eighth in the FTSE 100 short ranking.

In the week following the suspension of Woodford's Equity Income fund in June, hedge funds Marshall Wace, Lansdowne Partners and AQR Capital Management increased their short positions in Hargreaves.

The trio are still the biggest short sellers in Hargreaves, with AQR holding a 1.2% position and Lansdowne and Marshall Wace each holding 1%, according to the Financial Conduct Authority.

AQR has a 1.4% position in SJP, with Blackrock and Citadel Europe both holding 0.51%, FCA filings revealed.

Short sellers increased their bets against the pair in the immediate aftermath of the suspension and had since raised their negative positions.

Woodford last month said he was closing his investment business, but attention was now turning to firms that convinced clients to invest with the once-feted fund manager, the FT reported.

“Hargreaves has always attracted a degree of short investors, but has generally been strong enough to see them off,” the paper quoted Shore Capital analyst Paul McGinnis as saying.

“The true test of how this plays out in terms of whether their brand is damaged is a long-term issue.”

Hargreaves, the UK’s biggest fund supermarket, faces a potential class action lawsuit from its clients, many of whom are irate that the company continued to promote Woodford’s fund until it was frozen.

The intermediary had close to 300,000 of its 1.1m clients invested in Woodford’s funds, while SJP had a £3.5bn segregated investment mandate with Woodford, which it withdrew immediately after Equity Income’s suspension.

Hargreaves’ short sellers have benefited from a 23% slump in its share price since June, while SJP’s share price is little changed over that period.

Hargreaves, SJP, Lansdowne and Marshall Wace declined to comment to the newspaper.