One of the biggest pension funds in the world tries its hand at short selling and makes a killing in the process.
The Canada Pension Plan Investment Board unveiled large short positions in Virgin Galactic Holdings, the spaceflight company founded by Richard Branson, and bioplastics company Danimer Scientific. Since Jan. 18, the investment arm of Canada’s National Pension Plan has increased its short position in the two stocks to 2.2% and 1.9% of shares outstanding, respectively.
Unusually, the fund increased its position in both short positions for four straight days, according to an analysis of CCP regulatory disclosures by data firm Breakout Point.
READ US market near end of ‘superbubble’, says fund titan Jeremy Grantham
“It’s very rare in our records,” said Ivan Ćosović, founder of Breakout Point. Financial News. Shorts “illustrate how a successful pension fund can, in part, protect itself by short selling. The RPC is an exception among pension funds, it is only pension funds that routinely disclose shorts through Europe.”
The recent sharp market fluctuations have proven beneficial for the pension fund. Danimer has plunged around 47% this month, while Virgin Galactic has fallen around 38%. The CCP fund declined to comment. Financial News.
The Canada Pension Plan’s 10-year annualized net nominal rate of return is 11.6%, according to the fund’s website, and as of September it says assets under management exceed C$540 billion, or 427 billions of dollars.
A short seller borrows shares to resell them in the market, then buys them back after the shares drop, returning the shares and pocketing the difference. Most European regulators require funds to publicly disclose short positions exceeding 0.5% of a stock’s outstanding shares.
Short strategies saw some positives after bull markets dominated in 2021. Since the start of the year, US indices have been trending lower. The S&P 500 moved closer to correction territory during intraday trading on January 24. While it closed in the green, it is down nearly 7.5% this year. The Nasdaq is now considered to be in correction — the index is down more than 10% since Jan. 3.
READHedge funds scour Reddit a year after GameStop: ‘This is the tip of the generational change iceberg’
Awareness of short selling has grown in the public consciousness since last year’s GameStop saga. Retail investors tried to “squeeze” hedge funds that held short positions in the company. Their efforts briefly saw retailer stock in the game close at $325 per share, a 2,700% increase.
To contact the author of this story with comments or news, email Jeremy Chan