Big Short’s Eisman Expands U.K. Short Bets to Three Banks on Brexit

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Steve Eisman, the Neuberger Berman Group money manager, widened his bets against U.K. banks, but has otherwise steered clear of British markets in the run-up to Brexit.

“Nobody has a freaking clue,” Eisman, 56, who famously foresaw the collapse of subprime mortgages before the 2008 financial crisis, said in a telephone interview. “The situation is so fluid that it will be foolhardy to take a large position either way.”

The money manager, who runs long-short money pools for Neuberger Berman, wouldn’t identify the banks, but said the bets make up 6 percent of his strategy and he has no other U.K. positions. Eisman said at a conference in Dubai in November that he was shorting two U.K. banks.

“Nobody can have a long-term view about the health of the U.K. economy if there’s a Brexit,” he said. “But I do know that the assumption of U.K. investors is that if there’s a Brexit, the U.K. will go into a recession.”

Greater Risks

Short sellers, who sell borrowed shares to buy them back at lower prices and pocket the difference as profit, have been wagering against companies in the U.K. from retailers to real estate as the risk of a no-deal Brexit increases. Hedge fund manager Crispin Odey, an advocate for the U.K. leaving the EU, renewed a bet against the pound last month as lawmakers’ failed to agree on the divorce terms.

Eisman’s bets against the housing market before the 2008 financial crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which showcased money managers who foresaw and profited from the market turmoil. A character based on him was played by Steve Carell in the movie of the same name.

The money manager joined Neuberger Berman after closing his hedge fund Emrys Partners in 2014, and he currently runs managed accounts and money pools betting on rising and falling share prices. His bigger short bets are in Canada, where roughly a quarter of his fund’s capital is wagering against financial firms on the prospect of mortgage portfolio losses.

His strategy returned 11.4 percent from November 2016 to the end of last year, according to a company statement. Equity hedge funds gained 7.5 percent during this period, data from Hedge Fund Research Inc. show.

Eisman said Prime Minister Theresa May is unlikely to get any concessions from the EU that parliament would accept, and an extension of the March 29 deadline for Brexit is now a more likely scenario.

“I suspect we will be talking about the Brexit at least through the summer,” he said.

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