Dalio's Bridgewater Trimmed Emerging-Market Exposure Before Rout

  • Fund’s equity portfolio halved exposure to one of biggest ETFs
  • Emerging-market stocks had biggest monthly rout in two years

Billionaire hedge-fund manager Ray Dalio cut his holdings in three of the largest emerging-market equity ETFs last quarter before stocks sold off in the biggest monthly rout in two years.

Dalio’s Bridgewater Associates, which runs the world’s biggest hedge fund, halved its holdings of the iShares MSCI Emerging Markets ETF to 33 million shares, a filing showed Tuesday. The $160 billion money manager, which has about $5.6 billion in emerging-market ETFs, also reduced its holdings in the Vanguard FTSE Emerging Markets ETF by more than 20 percent to 69 million shares.

Emerging Exit

Bridgewater's stake in EM funds is down nearly 40 percent since third quarter of 2017

Source: Bloomberg

Bridgewater also reduced its exposure to the iShares Core MSCI Emerging Markets ETF to 16 million shares from 25 million in the prior quarter. That ETF fell by 6.7 percent last week before rallying in the past three days. After returning 37 percent in 2017 on the back of higher growth, better earnings and a weaker dollar, it’s up just 0.9 percent to start the year.

In August, Dalio said he was tactically reducing risk as a surge in global populism was intensifying civil conflict “to the point that fighting to the death is probably more likely than reconciliation.” The hedge fund manager said on Monday that risks of a recession during the next 18 to 24 months are rising.

Bridgewater Associates Founder Ray Dalio says the risks of recession are rising. Bloomberg’s Jason Kelly reports.

(Source: Bloomberg)

"We are focusing more on 2019 and 2020," he wrote on LinkedIn. "Frankly, it seems to be inappropriate oversight to not be talking about the chances of a recession and what that recession might look like prior to the next election."

At the World Economic Forum in Davos last month, Dalio said that the economic environment was good for stocks but bad for bond investors, and that “it feels stupid to own cash in this kind of environment. It’s going to be great for earnings and great for stimulation of growth.”

Money managers who oversee more than $100 million in U.S. equities must file a Form 13F within 45 days of the end of each quarter to list their holdings in stocks that trade on U.S. exchanges, as well as options and convertible debt. The filings don’t show non-U.S. traded securities, bonds, cash or wagers against stocks. Some firms have yet to report their latest holdings.

The largest holdings within developing-nation ETFs include Tencent Holdings Ltd, Samsung Electronics Co., Alibaba Group Holding Ltd, Taiwan Semiconductor Manufacturing Co. and Naspers Ltd.

— With assistance by Katia Porzecanski

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