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Was Brexit The Greatest Grift Of All Time?

Probably not, but it also can’t be entirely ruled out.
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By Stephen West [CC BY 2.5], via Wikimedia Commons

By Stephen West [CC BY 2.5], via Wikimedia Commons

Let’s do some wild speculating for a little while. An oily former commodities broker and currency trader and his former hedge-fund salesman buddy are having a little chat. The former has turned his tobacco-stained beer hall xenophobia into an increasingly successful political career, and the latter his addiction to gambling on televised talent shows into the one of the U.K.s biggest polling operations. They’ve already joined forces to turn the cheeky chappie Blackshirt from a Kentish Don Quixote into a serious force in British politics, laundering the ridiculous idea that the U.K. should leave the EU to prevent Poles from unclogging their pipes into a mainstream notion that the prime minister, admittedly not a particular impressive or sharp man, has had to pledge to put to a referendum. What if they were to take that referendum and turn it into an opportunity to make the other rich?

Here’s the plan: The Simon Cowell-loving pollster will sell his wares to whichever of his hedge fund buddies want to buy it, promising up-to-the-minute information on how people are voting long before the polls close. This is possibly illegal, but everyone else is doing it so why not. Their trick will be to have the aged Mister Bean lookalike tell everyone who will listen—which, depressingly, is everyone—that it’s been a good old-fashioned bar fight but his side’s taken the loss long before a single vote has been counted. This should send the pound up nicely, giving all of those hedge funds with his friend’s advanced polling data proving him wrong—which polling data he may or may not have gotten from his friend or someone close to his friend before or after he makes these statements, one of which cites a “financial-services exit poll,” which certainly sounds a lot like the poll his friend is doing—plenty of time to short the hell out of it at a very nice price, knowing that when the truth reflected in their exit poll comes true, the quid will take a very profitable nosedise.

Ridiculous, we know. But also possible! And maybe not even the shadiest thing that happened on that night just over two years ago.

Hedge funds aiming to win big from trades that day had hired YouGov and at least five other polling companies, including Farage's favorite pollster. Their services, on the day and in the days leading up to the vote, varied, but pollsters sold hedge funds critical, advance information, including data that would have been illegal for them to give the public. Some hedge funds gained confidence, through private exit polls, that most Britons had voted to leave the EU, or that the vote was far closer than the public believed—knowledge pollsters provided while voting was still underway and hours ahead of official tallies. These hedge funds were in the perfect position to earn fortunes by short selling the British pound. Others learned the likely outcome of public, potentially market-moving polls before they were published, offering surefire trades….

Rokos, which had worked with ICM and Curtice, ended up making more than $100 million, or 3 percent of its entire value, in a single day, according to the results Bloomberg first reported in the wake of the vote. Brevan Howard, which at a minimum bought exit-polling data from ComRes, made $160 million on June 24 alone. Brevan Howard declined to comment.

While the identity of YouGov’s Operation Pomegranate hedge fund client remains unclear, knowledgeable sources identified two clients for its pre-election polling. They are Capstone Investment Advisors and Odey Asset Management. Capstone, then managing more than $5.2 billion, made about 1.7 percent of the value of its biggest fund off its Brexit trades, Bloomberg reported after the vote, citing a knowledgeable source…..

At least six other hedge funds were among those negotiating or shopping for polls, according to interviews with polling executives, including one who accessed his email archives for Bloomberg during an interview. These included Arrowgrass Capital Partners, Element Capital, Maven, PointState and TSE Capital Management. The same polling executive said that at least three more—North Asset Management, SPX Capital and Vigilant—were trying to obtain information regarding the timing of media-published polls.

The Brexit Short: How Hedge Funds Used Private Polls to Make Millions [Bloomberg]

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