Short-sellers, who have plunged into financial services stocks in the past year, have increased their short positions in most financial stocks in the past two weeks.

But their gains from financial services have in recent months seldom been enough to offset their losses elsewhere in a depressed investing environment.

David Einhorn’s Greenlight Capital, which shot to prominence after taking a big short position in Lehman in July, fell in value by 1.8 per cent during August, and is down 3.2 per cent in the year to date, according to investors in the fund.

Hedge funds lost 1.5 per cent on average during August, according to the Credit Suisse/Tremont hedge fund index. In the year to date, hedge funds have lost on average 3.5 per cent, although dedicated short-sellers have returned 10 per cent.

Lehman, which has been one of the most heavily shorted stocks, had 18.5 per cent of its shares held by short-sellers as of Thursday, the latest day for which data is available, almost double the level of the week before, according to Data Explorers. The level is still shy of the record 22 per cent held by short-sellers in July.

Merrill Lynch, which had not been a big target of short-sellers, has seen a sharp rise in recent days. At the close of trade on Thursday, it had 2.5 per cent of its shares held by short-sellers, a rise from 1.7 per cent on September 2.

Even Bank of America, which had not figured heavily in the news until the weekend, has seen a rise in the week to Thursday in its stock sold short, to 2.5 per cent from 2.3 per cent.

Washington Mutual remains one of the most heavily shorted stocks, with a quarter of its stock held by short-sellers, a level that has remained stable. But many long/short funds also had big long positions in oil and commodities, where they have lost money. Long/short funds have on average lost close to 6 per cent in the year to date.

Several funds in recent days have rushed to reassure investors of any exposure to Lehman.

Traditional fund managers and pension funds – and the individual investors whose savings the funds manage – have been among the biggest losers.

The biggest holders of Lehman shares were Axa, the insurance group; Fidelity, Legg Mason and Vanguard, based on data to June. Janus, the investment group, appears to have taken an outsize position. But American Funds appears to have been underweight on Lehman and so miminised its exposure.

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