Hedge funds and banks are commissioning private opinion polls on voters’ intentions in the upcoming EU referendum so they can trade on the result, according to the Financial Times.
The paper reports that finance firms are commissioning exit polls on June 23, polling day, in a bid to try and get an early idea of which way the country will vote. This will allow banks and hedge funds to place bets that can theoretically earn them millions if the hunch turns out to be right.
The FT quotes an anonymous pollster as saying: “Hedge funds have asked for exit polls and for hourly polls on the day. Banks are certainly commissioning polls for their own consumption that are never released.”
The cost of these private polls is around £500,000 ($730,965) each, according to the FT.
Currency and stock markets are likely to see big swings whichever way the result goes, presenting a once in a generation opportunity for ambitious traders looking for a big score.
Joe Rundle, head of trading at ETX Capital, told BI last week that his firm is expecting a “20% fall in Sterling and a 20% rise in dollar, so a 40% move” in the event of a “Brexit” vote — a vote for Britain to leave Europe. ETX sits on the other side of trades from retail customers and is tailing off the leverage it offers in the run-up to the referendum to stop it getting burned. IG Group, the £2.8 billion retail trading company, has taken a similar approach.
For professional punters who make these trades — hedge funds and banks — it could be a huge payday. Hedge fund manager George Soros famously bet against the pound when it crashed out of the European exchange rate mechanism in 1992. Forbes estimates Soros made $1.5 billion in just a month from the position. Banks and hedge funds see the EU referendum as an opportunity for a similarly large score.
Investors have already piled up more than £11 billion in currency options that would profit if the pound falls more than 4% after the UK’s EU membership referendum on June 23, according to Bloomberg data.
The latest online polls show the “Leave” and “Remain” vote neck and neck, but phone polls give the “Remain” camp a strong lead of as much as 18 points.
Even if “Remain” does triumph on the day, the pound is likely to see a big “relief rally” as the uncertainty that has been dogging the market disappears.
The pound is down over 14% against the dollar since last May’s general election, the result of which set the wheels in motion on the referendum. Sterling fell sharply at the start of this year and hit its lowest point in February after UK Prime Minister David Cameron announced the date of the referendum. The pound has since rebounded and is at 1.468 against the dollar on Tuesday.
Banks and hedge funds have poured millions into funding both sides of the referendum debate.
Goldman Sachs and JPMorgan are both believed to have backed the “Remain” camp, while Sir Michael Hintze, founder of hedge fund CQ, is believed to have backed the anti-EU Vote Leave group. Crispin Odey, the founder of hedge fund Odey Asset Management, is also backing the “Leave” campaign.
David Harding, the founder of hedge fund Winton Capital Management, is on the board of pro-EU campaign group Stronger in Europe and has reportedly donated several million pounds. Egerton Capital’s John Armitage is also donating to the Stronger in Europe campaign.