Hedge fund puts its stamp on Royal Mail shares

[TrueBlueTerrier]

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Emerging Sovereign Group has set up a bet to benefit if the postal firm's share price falls

A hedge fund that made enormous gains by betting against China over the summer has turned its attention towards the Royal Mail.

Emerging Sovereign Group has started short-selling Royal Mail shares and how has a position worth £25m, or 0.53pc of the entire company, according to regulatory data.

Short-selling is a tool used by investors to profit from a falling share price. A firm will borrow shares from another investor in the hope of selling them back at a lower value.

Royal Mail has been the target of just a handful of large short-sellers since it floated on the stock market in October 2013. According to data from Markit, 1.6pc of the company’s shares are out on loan, down from a peak of 3pc in March. This represents about 5.5pc of the current available stock available to short sell.

The postal service’s shares soared in the months after their debut, rocketing from 330p to more than 600p, before falling back to under 400p within a year. In 2015, the stock has gained almost 8pc and was last week trading at around 460p. The appearance of ESG's short position did not provoke a large movement in the share price.

The Government last week trimmed its stake in Royal Mail to just under 14pc, but remains the privatised group’s biggest shareholder.

New York-based ESG, which manages several billion pounds of investments, has been a low-key participant in the London stock markets, with its only other short position currently targeting the supermarket Wm Morrison.

The group is majority-owned by Carlyle, the private equity giant, and was founded in 2002 with seed capital from the Tiger Management billionaire Julian Robertson. It has a particular interest in emerging markets and over the summer made a 60pc gain in one of its funds that was betting against China.

The ESG Nexus fund benefited from a devaluation in the Chinese yuan that fuelled concerns across the financial markets that the world’s second-biggest economy was slowing.

The success helped reverse the losses sustained in 2014, when investments designed to profit from Europe’s unstable recovery were wrong-footed by the European Central Bank’s plans to stimulate the economy with quantitative easing.

Neither Carlyle nor Royal Mail would comment.

Royal Mail's biggest investors

Postal Services Holdings (government stake): 13.99%
Royal Mail SIP: 8.4%
Blackrock: 5%
MassMutual: 3.7%
Norges Bank: 3%

Correct as of 18/9/15. Source: Bloomberg data

[Decky Boy]

My understanding is that the Royal Mail Sip accounts for 11% of all shares ? ? ?

[arnold cheshire]

My understanding is that the Royal Mail Sip accounts for 11% of all shares ? ? ?

People who have left might have sold their shares