Hedge Funds

Plenty of capacity for short sales, says Citigroup report


In a new report, Citigroup Alternative Investments turns conventional wisdom on its head to argue that "constraints on shorting are not very severe and the market contains enormous capacity."

The study, which was authored by Tanya Beder, CEO of Tribeca Global Investments, and three other Citi alternative investment specialists, admitted the market for "direct" shorts remains small. Indeed, if such shorting activity increased by as little as 24% to 50% of gross hedge fund AUMs, its capacity could be exhausted within a year, according to the study.

But the authors argue that when synthetic shorts, using such derivatives as over-the-counter