Bridgewater Cut 41% of Emerging-Market Stock ETF HoldingsKatherine Burton and Ye Xie
Bridgewater Associates, once the biggest investor in the world’s two largest emerging-market exchange-traded funds, sold 41 percent of its holdings in the third quarter amid a rout in developing-nation assets.
The firm, led by Ray Dalio, cut its investments in Vanguard Group Inc. and BlackRock Inc.’s ETFs to a combined 104 million shares, from 175 million in the previous three-month period, according to a form 13F filed Thursday. The value of the ETF holdings dropped more than 50 percent to $3.4 billion as a result of share price declines and the divestments.
MSCI Inc.’s emerging-market index lost 19 percent in the three months through September, the biggest quarterly decline in four years, as a rout in the Chinese stock market and a surprise devaluation of the yuan roiled global markets. Investors’ confidence in developing nations soured as a growth slowdown and a looming interest-rate increase in the U.S. threaten to drain capital from riskier assets.
“Emerging markets have fallen out of favor,” Marc Chandler, head of currency strategy at Brown Brothers Harriman, said in an interview on Bloomberg Television. “We had a love affair with them and they break our heart again. Emerging markets are in a difficult place now and it’s going to stay that way.”
Bridgewater’s sale of the two emerging markets ETFs helped drive a 31 percent decline in its U.S. public equity holdings, the filing showed. Bridgewater, based in Westport, Connecticut, also sold 230,300 shares of the SPDR S&P 500 ETF Trust, which tracks the broader U.S. stock market.
The company has said the impact of emerging-market losses is likely to be more widespread than in the crises of the 1980s and 1990s because investors have more money invested in developing markets.
The reduction in the emerging-market investments marked a sharp reversal after Bridgewater had steadily boosted its holdings in recent years.
Its holdings in the $36 billion Vanguard FTSE Emerging Markets ETF dropped to 67.4 million shares by September, from a peak of 116.2 million in December. It had 19 million shares in June 2011.
The hedge fund’s investment in the $23 billion iShares MSCI Emerging Markets ETF fell to 36.5 million shares from 80.1 million a year earlier.