Investors worldwide are betting more than $1 trillion on a collapse in stock prices.

Managers from William Ackman to Jim Rogers made a total of at least $1.4 billion in July with wagers against American mortgage financiers Fannie Mae and Freddie Mac, data compiled by Bloomberg as of last week show. Harbinger Capital Partners staked $665 million that British mortgage lender HBOS Plc would drop and Sao Paulo-based hedge-fund manager Francisco Meirelles de Andrade’s short selling of Cia. Vale do Rio Doce is also paying off.

More than $1.4 trillion of equities worldwide are now on loan, about a third higher than at the start of 2007, data compiled by Spitalfields Advisors, the London-based firm specializing in securities lending, show. Almost all of that is being used to speculate that shares will fall, according to a finance professor at Georgetown University who studies short selling, James Angel. The global economic slowdown, $453 billion in bank losses and an explosion of funds that can profit from stock declines spurred the increase in short selling, helping send 22 of 23 countries in the MSCI World Index into bear markets.

“It’s a huge amount of money,” a London-based research fellow for Cass Business School and a former managing director at Citigroup Inc., Peter Hahn, said. “Shorts have come a long way. They are getting into the mainstream, and long holders need to understand the shorts are not evil.”

While American and British regulators tighten rules on short sellers amid concern they’re accelerating more than $11 trillion in global stock losses this year, countries from Indonesia to India are opening up to the practice, which involves borrowing stock to sell it on the expectation it can be purchased at a lower price before paying back the loan.

Assets at so-called 130/30 and 120/20 funds, or those that are allowed to both hold stocks and short them, may climb to $2 trillion by 2010 from $140 billion in 2007, according to a study last year by Westborough, Mass.-based Tabb Group. Spitalfields estimates these funds may borrow an additional $600 billion by 2010.

Spitalfields was founded by Mark Faulkner and Bill Cuthbert in 2004 after careers in securities lending and investment banking at firms including New York-based Goldman Sachs Group Inc. and Frankfurt-based Deutsche Bank AG, respectively.

Short selling on the New York Stock Exchange rose to 4.6% of total shares last month, the highest since at least 1931, according to data compiled by Bespoke Investment Group LLC, the Harrison, N.Y.-based firm that manages money for wealthy investors and provides financial research to institutions.

Short selling of Washington-based Fannie Mae and McLean, Va.-based Freddie Mac, which own or guarantee about half of the $12 trillion of American mortgages, surged before the shares plunged this month on concern they will require a bailout that would wipe out shareholders.

Fannie Mae tumbled 64% from the end of June, when so-called short interest stood at 138.7 million shares, through July 15, according to data compiled by Bloomberg and the NYSE. Freddie Mac sank 68% from the end of June through July 15 after short interest reached almost 83 million on June 30, the highest since at least 1991.

Even after a 90% rebound by Fannie Mae and a 75% surge by Freddie Mac in the final three days of trading last week, that would have left the shorts with a combined profit, excluding costs, of at least $1.4 billion Mr. Ackman, 42, who oversees $6 billion at Pershing Square Capital Management LP in New York, said on July 15 he had short positions in both Fannie Mae and Freddie Mac. Mr. Rogers, 65, said on July 14 that he hadn’t covered his short positions in Fannie Mae and would increase his bet if the shares were to rally.

“Short sellers are a very important part of the ecosystem of our financial markets,” said Mr. Angel, a professor at Georgetown’s McDonough School of Business in Washington. “The same way that lions go after a herd, they go after the weaker animals. The shorts will pick on a company where there’s a legitimate controversy over its valuation.”