Merrill woos hedge funds with new 'falling shares' target

15 May 2008

Analysts at investment bank Merrill Lynch are to extend their coverage of companies which are set to underperform across the next year, the Times reports.

Equities specialists at the firm are to increase the number of companies they cover whose shares are predicted to fall from 12 per cent of the total to 20 per cent.

This change was contained in a company-wide order - which, it is thought, will help to attract clients who prefer to "short" the firms they invest in.

Many hedge funds are attracted to this form of investing, in which a profit is made if the share value falls below the price at which it agreed to sell.

Commenting on the move, president of global research at Merrill Candace Browning said:

"We are introducing a new equity rating system on June 2nd - a framework explicitly intended to provide clients with enhanced transparency into analysts' views, greater differentiation among the equity ratings within a sector and closer alignment between rating distributions and historical stock performance."

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