Short selling has declined this year as hedge funds ditch bets against a relentless, stimulus-driven stock market rally, prompting a drop in income for asset managers and brokers involved in such trades.
FILE PHOTO: A TV reporter stands in front of a large screen showing stock prices at the Tokyo Stock Exchange after market opens in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon/File Photo
Figures from research firm DataLend showed stock lenders’ revenue tumbled almost 15% in the year to Sept. 30 from 2019 while revenue for the September quarter alone was $1.8 billion , the lowest in the four years of comparable records. That drop, led by declines in Asia and the United States, shows how an apparently unstoppable equities rally has caused many hedge funds to reduce shorting, typically a crucial way of earning market-beating returns.
“It’s ‘whatever it takes,’ globally, and it is by far the most frustrating rally for all our client base,” said George Boubouras, head of research, at K2 Asset Management, a Melbourne based fund which invests worldwide. “With so much liquidity from central banks it is a difficult macro environment to run sustained short positions.”SPY.PAnalysts and brokers say this trend means less liquidity for traders and pressure on those who use stock lending revenue to keep trading fees low.
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