Lansdowne Partners, one of the world's biggest hedge funds, has taken a massive stake in the Royal Mail sell-off, sparking controversy that not enough stock was given to U.K. pension fund managers.
Royal Mail's shares opened 36 percent higher at 450p, way above the government's offer price earlier this week for the U.K's mail delivery service of 330p.
Landsdowne, along with sovereign wealth funds including ADIA (Abu Dhabi), KIA (Kuwait Investment Authority), GIC (Singapore) and Norges (Norway) were all given allocations of around £50 million ($79 million), according to people close to the deal.
Based on the offer price and the £50 million allocation, the funds would already be sitting on a paper profit of some £18 million.
The Royal Mail, which began conditional trading on Friday, is the UK Government's biggest privatisation in over 20 years. It was heavily oversubscribed despite being priced at the top of the range, valuing the company at £3.3 billion at Friday's open. Retail investors were given shares worth just under £750 after more than 690,000 applied to own the postal service stock.
In total, the Government sold 33 percent of shares to retail investors and gave 10 percent to postal workers, in a bid to placate unions over the privatization process.
The Government will retain a 30 percent stake in the company with remaining stock being sold to so called institutional investors.
(Read More: British public flock to Royal Mail share offer)
However, according to sources, only one UK "long only" fund manager -- Threadneedle -- was among the top 10 shareholders, with The Royal Mail's advisers favoring foreign SWFs and US fund managers. Insiders close to the deal said that the top 10 shareholders had held talks at least five meetings with the Royal Mail about supporting the deal when it came to market.
It is thought that over 800 institutions fought over 300 bundles of shares, with no applicant receiving more than the 3 percent disclosure threshold.
London-based Lansdowne Partners is also the third-biggest shareholder in Lloyds Banking Group, and recently added to its shareholding after the Government's privatization kicked off last month.