Billionaire hedge fund manager bags £100 million RBS profit
Controversial billionaire hedge fund manager John Paulson is estimated to have made over £100 million by betting against the share price of Royal Bank of Scotland in an operation known as "shorting". The controversial investment strategy has been pinpointed as one of the reasons for the collapse in the UK banking sector while others in the market suggest it is fundamentals alone which move the market.
Paulson is a man who made more than $3 billion by betting against the US housing market at a time when everybody was expecting the market to continue higher and higher. He has also "shorted" other UK banking stocks such as HBOS and Lloyds TSB but it is the £100 million profit from his Royal Bank of Scotland position which has caused most upset in the market. This is the exact investment strategy and investment outcome which appears to be praying heavily on the minds of regulators and the UK government.
Many observers now expect the government to impose an additional ban on short selling whether this is temporary or permanent. The regulators are concerned that rumours in the market are being used by short sellers to drive prices lower, causing panic amongst many investors. Whether this is correct or not remains to be seen but the volatility in the UK banking sector has not been assisted by hedge funds selling stock they do not own.
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