Marshall Wace Cuts Bets Against Banks as Trump Win Lifts Shares

Hedge fund Marshall Wace cut wagers against European lenders such as Deutsche Bank AG and Commerzbank AG after Donald Trump’s surprise victory in the U.S. presidential election sparked a rally.

The investment firm cut its short positions in Commerzbank four times since Trump’s Nov. 8 win, to 0.58 percent of outstanding shares, or about $55 million, according to company filings. The money manager’s bet against Deutsche Bank is about 0.77 percent of the shares, worth $170.7 million, down from 1.02 percent on Oct. 27, the filings show.

Banks have surged since Trump beat Hillary Clinton on a platform that included repealing the Dodd-Frank Act’s strict capital requirements on lenders and a proposed temporary moratorium on new financial regulations. Deutsche Bank shares have rallied 17 percent, while Commerzbank is up 13 percent.

Short sellers profit by selling borrowed shares and buying them back at lower prices. An increase in share values leads to losses, leading them to cut wagers. Total bets against Deutsche Bank declined to about 4.23 percent on Nov. 17 from this year’s high of 6.3 percent on Oct. 4, data compiled by Markit Ltd. shows.

Deutsche Bank remains the company’s largest short bet by value in the financial industry. Marshall Wace, which manages $25.4 billion in hedge-fund assets, also trimmed wagers against Unione di Banche Italiane SpA and SEB AB after Trump’s victory.

A spokesman for Marshall Wace, which is 25 percent owned by KKR & Co., declined to comment. Deutsche Bank and Commerzbank also declined to comment. UBI and SEB did not immediately reply to a request for comment.