This guide explains how you can see the biggest short positions and if you should copy hedge fund short positions.
You can find out what professional investors are short-selling using our UK Share Short Position Statistics sortable and searchable table.
Or you can use one of these other excellent resources.
- FCA: The FCA website has a notification and disclosure of net short positions page on its website with a spreadsheet that you can download to see all the notifications that fall under the EU Short Selling Regulation (SSR).
- Shorttracker: Shorttracker, by Castellain Capital, the website shows the data from the FCA spreadsheet in table form that is searchable by stock, fund, data and so on. You can also see the short discloser percentages in graph form.
- Stockomendation: Stockomendation, the trading tip aggregator, now also displays short selling data. It’s more comprehensive than Shorttracker as when looking for shorting ideas, you can also see who has buy recommendations on shorted stocks.
There was a great article in the FT years ago about how hedge fund managers at GLG (one of the biggest UK hedgies, owned by Man Group, where I used to work) only get stock picking right about half the time. And that that, was in fact, ok.
The reason being of course, that (as you should know by now) it’s not what you buy or sell. Trading is really about how you manage risk and your positions after a trade has been put on.
GLG’s approach is as basic as buy low, sell high in that they run profits and cut losses. So, if they only pick winning trades half the time, they still make money by making having a greater win:loss ratio on the positions.
If you want to know more about win-loss ratios read The Art of Execution by Lee Freeman-Shor. It’s one of the best books on post-execution trade strategy.
Now you know how to find out what hedge funds are shorting. But. Before you start playing amateur trader and screeching, “core blimey, there are more shorts than a Wham concert in this stock,” it’s important to cover the risks of following a hedge fund’s short positions…
Long/Short Hedging
Most alternative asset managers, aka hedge funds, will have two funds. One will generally be a long-term income or growth fund that invests in assets they believe will outperform the market or are income-generating through high dividends or bond yields.
Hedgies may also have a long/short portfolio, which consists of stocks or assets that are market neutral. The idea here is that it doesn’t matter if the overall market goes up or down as the fund will have an equal amount of long and short positions (albeit with a slight weighting if they have an overall market bias).
- Retail investors can do this through pairs trading – read our guide to pairs trading.
This means that if a hedge fund has a large disclosed short position, they may not actually think the stock is going to go down. It may be part of a sector or pairs trade. For example, if a fund doesn’t know (or care) whether the banking sector in the UK will go up or down. But does think that Barclays will under-perform Lloyds, they will sell Barclays and buy Lloyds. In this case, they have limited their exposure to large moves in either the underlying index or the banking sector.
Always Invested
When an investor gives a hedge fund their money, they are doing so for the fund manager to have it actively traded in the market. Even though hedge funds tend to be higher risk than other types of investment fund they still have to have some sort or risk controls and portfolio exposure caps.
They do not (or should not) have the money sat around in cash, then put all their eggs in one basket and Rio trade on a whim.
So when hedge funds disclose a large short position, it will probably be part of an overall portfolio of positions hedged with options, index futures or some other OTC product you’ve never heard of and wouldn’t be able to trade even if you wanted to.
Liquidity
Well, what makes a market is opinions. You can either jump on the bandwagon and follow them or wait patiently for the bear squeezes when they buy their large position back.
What the major players are buying or selling, as with technical analysis, economic indicators, news flow, and fundamental research, all provide a stimulus for trading.
If you want to see what’s going down, flick through the charts on Investors Intelligence. You can rank stocks by Stockcube’s propriety trend score as well as P&F breakout signals.
How To Short Sell Stocks
If you want to try and profit from share price falls or hedge your long-term investments you can short the market with these types of derivative contracts:
- CFDs – trading on leverage
- Spread betting – betting on the market going down
- Options – buying puts or selling calls
Want more information on short selling?
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
