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Hedge funds use secret polls to cash in on market volatility on referendum night

Published 22/06/2016

Hedge funds are commissioning private polls on the referendum vote.
Hedge funds are commissioning private polls on the referendum vote.

Hedge funds are gearing up for a day of extreme volatility in currency and stock markets as they look to profit from the result of the EU referendum, with several commissioning private exit polls in order to then bet on the price of sterling and pick up shares at rock bottom prices.

Heavyweight financial institutions have approached pollsters as they look to be the first to reap the rewards from a swing in the value of the pound triggered by the result on June 24.

The firms are looking to take advantage of electoral law, which allows exit polls on the day of the referendum, but forbids them being published before the polls close at 10pm.

Kathleen Brooks, research director of City Index, said: "Although the Remain camp has managed to stem the recent wave of support for the Brexiteers, the outcome is still very much uncertain.

"There is no official exit poll due on Thursday night, however, rumour has it that some large hedge funds have organised their own unofficial exit polls, so expect lots of volatility throughout the night as we all try to cut through the fog of the vote count to find out who will emerge victorious."

Sterling has remained under pressure in recent weeks as polls pointed to momentum in the campaign for Britain to Leave the European Union. However, the pound bounced back to its highest level since the start of the year on Tuesday as opinion polls shifted.

Sterling hit 1.478 US dollars at one stage - its highest level since January 4 - building on the surge seen on Monday, when it notched up its biggest one-day gain against the dollar for nearly eight years.

Hedge funds could also look to buy-up large stakes in "unique" companies if their valuations take a tumble in the event of a Brexit vote.

David Neuhauser, managing director of activist hedge fund Livermore Partners, told Bloomberg TV that ''Brexit' volatility "makes it a bit easier if you have levels of cash because the whole idea and the whole issue with hedge funds in the past decade is that there hasn't been a lot of volatility and there hasn't been a lot of dislocation in the market, so typically you want times when in which people are afraid to invest so you can put money to work into situations in which there is opportunity abound over a longer period of time."

He added if there is "a short run, there is a lot of dislocation, valuations are blowing down and there is some really unique companies with some really unique assets, we want to buy situations just like that for sure."

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