Hedge fund takes £1.1bn stake in Lloyds

According to the latest available Thomson Reuters data, this equates to a 2.5 per cent stake in Lloyds Banking Group, putting it ahead of Legal & General Investment Management, which has a disclosed 2.25 per cent stake.

The government has more than 40 per cent through its UK Financial Investments (UKFI) vehicle.

The Lansdowne holding is a bet on the UK banking sector, and the source said that view extended out to the wider sec-tor.

Other holdings were not disclosed, but the hedge fund firm had announced on Monday that it had a small short position in Prudential.

The source said the Pru short should be seen as a "slight hedge" against the long position on UK banks.

Lansdowne had close to $12 bn in assets under management as of end-June 2009.

One of the more secretive hedge fund firms, it was one of the winners during the credit crisis as it bet that some financial firms' shares would fall.

Lansdowne would not comment on the size of its holding in Lloyds, while the bank was unable to comment on the stake as it is below the 3 per cent threshold above which disclosure is mandatory.

UKFI also declined to comment.