Hedge fund makes record bet against Lloyds shares

Marshall Wace, which manages about $45bn (£34bn), has taken a 0.51% short position against Lloyds - the first bet of that size against the bank since disclosure rules were introduced in 2012, the Financial Times reported. The short position, revealed in a regulatory filing, was worth more than £100m based on Lloyds' share price on Thursday.

Short sellers borrow shares and sell them in the market hoping to buy them back more cheaply when the price falls. Investors have to disclose a short position of 0.5% or more, meaning Marshall Wace could have started building its bet some time ago.

Shares of the bank, which also owns Halifax and Bank of Scotland, have more than halved in 2020. The bank has warned that it will suffer a financial impact from supporting customers during the Covid-19 crisis by providing loans to small businesses and payment holidays for consumer borrowers.

Lloyds is the UK's biggest retail bank and mortgage lender and has virtually no overseas activities, tying its fortunes closely to the British economy. Marshall Wace's short position is a bet against Lloyds rather than the wider economy because the fund thinks UK shares will rise overall, a person familiar with its strategy told the FT.

The bank set aside an extra £2.4bn for bad debts in the second quarter and said it was ready for a "significant deterioration" in the economy. The bank is also looking for a new boss before Antonio Horta-Osorio leaves in June 2021.

Lloyds shares were up 0.6% to 28.38p at 15:56 BST.