European Short Observer February 2015

In February the European markets extended their rally and our model portfolio tracking all disclosed European short positions declined heavily.
The value-weighted portfolio was down 8% compared to a decline of 6.9% for a short on S&P 350 Europe index, accounting for dividends and hedging currency fluctuations.

Glencore again moved the portfolio in a meaningful way, this time costing 180 basis points as three managers weathered a strong rally, with Lansdowne being the largest seller. Another significant detractor was Volkswagen with a large short position from a single manager, BG Master fund.

Among notable contributors, Deutsche Lufthansa rewarded new short sellers Egerton and Marshall Wace, who initiated the short in February. Also Viking Global has been short the name since December of last year. Lone Pine and AKO were short in 2014 but covered fully after a rally in December.

The next largest contributor was Ocado Group with Blue Ridge and Point Lobos among managers short the name. FIL Fund Management covered their position fully after pocketing a 13% slide in February.

J.Sainsbury remains the most popular short position even as Discovery covered fully in February. One of the most highly covered positions was Derwent London PLC as Och-Ziff and Arrowgrass Capital completely covered their positions. CQS covered in January, leaving no managers short the name following a relentless 30% rally in the stock.
There were no new large short positions initiated in February, but Alstria and Aixtron grew existing short interest.