Marshall Wace emerges with a £100m bet against Tesco
Marshall Wace, a Mayfair-based hedge fund, comes up with a £100m bet against Tesco, Britain’s largest supermarket
Marshall Wace, a Mayfair-based hedge fund, has come up with a £100m bet against Tesco, Britain’s largest supermarket.
The secretive fund, run by Sir Paul Marshall and Ian Wace, is using so-called ‘short’ contracts to make money if share prices fall.
The position has been revealed in official data released by the Financial Conduct Authority, which requires hedge funds and other short sellers to publish their holdings.
Pushed: Tesco has been one of the most resilient stocks in the market during the pandemic and is seen as a solid investment compared to smaller rivals.
Marshall Wace may have already racked up several million pounds from the move after shares in the FTSE100 grocery store fell 7.4 percent last week.
Tesco has been one of the market’s most resilient stocks during the pandemic and is seen as a solid investment compared to its smaller rivals.
But gloomy updates from its US peers in recent days have hit share prices of global retailers. Walmart and Target, two of the largest US chain stores, have warned that inflation headwinds are intensifying.
Target shares fell 25 percent on Wednesday after its update, the biggest drop in its stock since the Black Monday market crash of 1987.
In Britain, higher energy and fuel prices pushed inflation to a 40-year high of 9 percent in April and the Bank of England warned it could hit double digits later this year.
Clive Black, director of Shore Capital, said: “Supermarkets have traditionally been very resilient, but the UK and US inflation figures this week have been higher and rising faster than many expected.” .
‘There were also big downgrades in the US showing the rate at which inflation is affecting buyer behaviour.
“Companies are also struggling because they can’t pass on the additional costs to customers.
‘It would seem that Marshall Wace has taken a dim view of Tesco’s ability to withstand these mounting pressures. But if Tesco catches a cold, many other discretionary retailers [selling nonessential goods] will catch the flu.
Marshall Wace and other short sellers have also placed bets against a host of other retailers as buyers have tightened their budgets.
Half of the ten shortest stocks are retailers, including Asos, Currys, Boohoo, Kingfisher, owner of B&Q, and AO World.
Currys’ shorts are at an all-time high of 6.4 percent, despite starting this year with none. Sainsbury’s, Marks & Spencer and Ocado are also in the line of fire.
The total number of short positions in the retail sector has risen to over £1 billion.
Marshall Wace has also taken stakes against a number of big name companies including miner Fresnillo, Royal Mail, WHSmith and Deliveroo. In April, he was found to be the fund manager with the largest European short exposure, accounting for 22 percent of recorded short positions.
Marshall, who founded the firm with Wace in 1997, is the father of former Mumford & Sons banjo player Winston, who was ‘cancelled’ and forced to leave the band after praising a book by a right-wing American author on social media. .
Marshall has also been outspoken: last year he criticized the City for allowing the UK stock market to lag rivals because investors are too fixated on chasing dividends.
This is leaving companies undervalued and unnecessarily ripe for takeovers, he said, and risks London becoming a “kind of Jurassic Park” where fund managers “are engaged in cutting coupons rather than fostering growth and the innovation”.
Despite its strong performance, Tesco came under fire earlier this month for paying chief executive Ken Murphy £4.75 million last year. This included the highest annual bonus given by the supermarket since 2016.