Several of London’s largest hedge funds are backing Barclays’ £4.5bn ($8.9bn) capital increase, underscoring the complex roles they are playing in the recapitalisation of the UK banking sector.

GLG Partners, Lansdowne, CQS and Och-Ziff have all agreed to take up a large chunk of Barclays shares as part of its £1.7bn placing with institutional shareholders, according to the prospectus issued by the bank on Thursday.

The news comes after hedge funds have been under intense scrutiny for their actions in selling short the shares of banks attempting to raise capital through rights issues. The Financial Services Authority unexpectedly tightened its rules on the disclosure of short-selling in an attempt to stamp out what the regulator believes were attempts by hedge funds to force down banks’ share prices artificially.

This week, GLG disclosed a short position worth more than 4 per cent of Bradford & Bingley, the ailing mortgage lender, while Lansdowne revealed it was short shares of HBOS, the UK bank that is in the process of raising £4bn.

GLG has committed to invest up to £175m in Barclays’ shares at 282p, while Lansdowne is investing up to £76m. The share allocation will be scaled down depending on how many of Barclays’ existing shareholders take up their right to subscribe to the offering on the same terms.

Bankers believe the extent of the clawback will depend on whether Barclays shares continue to trade above the placing price. The shares on Thursday fell 18.6p to close at 303¾p.

Several blue-chip institutional investors, including M&G, Scottish Widows and Standard Life, are also participating in the placing. The largest allocation is being taken up by M1 Capital, a company controlled by Lebanon’s Mikati family, which has committed to invest up to £250m as part of the placing.

The involvement of hedge funds underscores how quickly the funds are able to commit large amounts of capital. Barclays informed some investors of the offering on Tuesday and gave them 12 hours’ notice to decide whether or not they wanted to participate. They are investing alongside Qatari investors who have committed to invest up to £2.25bn in Barclays, equivalent to a near-10 per cent stake in the bank.

Some bankers suggested on Thursday the hedge funds may have participated in the placing as a way of covering short positions in Barclays. However, the extent of the short selling in Barclays is unclear as the bank’s placing is not covered by the FSA rules on rights issues.

Barclays will pay all investors a fee worth 1.5 per cent of their commitment.