“It is much harder to see opportunities in the short book, either in terms of generating specific value or as a hedging offset to the long investments,” wrote Peter Davies and Jonathon Regis, managers of the Lansdowne Developed Markets fund, in a letter to investors this week.
Like many firms, Lansdowne’s investment thesis had been that quantitative easing had fuelled a misallocation of capital to poorer quality companies. Its managers believed that these stocks would eventually founder as competition hit already-expensive share prices, according to investor letters reviewed by the Financial Times. Ultra-low financing costs were bound to rise eventually, Lansdowne reasoned, hurting those companies that had relied on cheap money to survive. As recently as last year, the firm’s leadership wrote that the opportunities for shorting were “immense”.
The full article is available at https://www.ft.com/content/c982630d-d898-4f78-ab3d-b99fd7e17279