More than one in four sophisticated retail investors are using shorting in their portfolios, according to a new study by GraniteShares.
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Will Rhind, Founder and CEO at GraniteShares
As UK banks have struggled, more individuals are using shorting techniques – sometimes called short selling – to protect their portfolios against losses or to profit from falling share prices, GraniteShares says.
Its research among sophisticated retail investors who regularly trade shares, bonds and funds found 26% of respondents have taken short positions in their portfolios.
Around one in eight (12%) said they have used shorting specifically to protect their portfolios in falling markets. However 39% of respondents do not short, because they do not know how to or did not know it was possible
Institutional shorting comes to retail markets
Shorting was long considered an institutional investment tool, used primarily by hedge funds. Viking Capital, which controls over US$41 billion assets under management, recently declared one of the biggest short bets ever recorded against Lloyds Banking Group. The fund disclosed a 0.61% net short position, valued at around £166 million. The last short position disclosed on Lloyds was by Marshall Wace, for 0.61% in 2020.
Through short exchange traded products (ETPs), sophisticated retail investors can now take short positions on mainstream trading platforms. The ETPs are tradable on mainstream stock markets, such as the London Stock Exchange, and have no margin requirements meaning that investors cannot lose more than they invest.
GraniteShares offers leveraged and short products on multiple financial stocks, including Lloyds Banking Group and Barclays. Its data shows 24% of GraniteShares’ UK bank investments are on short exposures.
Will Rhind, Founder and CEO of GraniteShares said: “British banks have seen profits rise, thanks to rising interest rates and improving margins. But this has not equated to share price growth. Investors remain worried that bad debts and a possible recession could hit shares. Shorting isn’t right for all investors but, for a sophisticated trader, short ETPs can and are being used to protect a portfolio against falls.”
Source: ETFWorld.co.uk
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