markets

Bridgewater Hedge Fund Beats Peers, Cuts Europe Shorts

Updated on
  • Firm’s net long position on U.S. stocks reduced, person says
  • Bridgewater is said to still be net short equities overall

Bridgewater Associates, the hedge fund firm led by billionaire Ray Dalio, is outperforming peers this year even after losing money in April, according to a person with knowledge of the matter.

The investment firm has gained about 4 percent in its Pure Alpha fund in the first four months of this year after a 1 percent loss last month, the person said, asking not to be identified because the information is private. Hedge funds on average returned about 0.3 percent during the first four months of 2018, according to Eurekahedge.

Separately, Bridgewater’s disclosed shorts against European stocks have now declined by 80 percent from February to just over $4 billion, according to data compiled by Bloomberg, though that figure is not sufficient to gauge how the $160 billion firm is positioned in the market. Bridgewater drew investors’ attention after putting on a $22 billion wager against European companies earlier this year.

A spokeswoman for Westport, Connecticut-based Bridgewater declined to comment.

The last 11 disclosures in Europe by Bridgewater have shown the firm is reducing some of its bearish wagers. Three of those stocks were Intesa Sanpaolo SpA, UniCredit SpA and Telefonica SA, which have all seen their share prices rise this year. The Euro Stoxx 50 Index has gained about 2 percent in dollar terms this year, including reinvested dividends, meaning short wagers have not been a profitable trade.

The fund made money trading developed-market currencies and rates trading in April, while losing money on its equities and emerging-market currency bets, a second person said. The strategy has also reduced its net long bets on U.S. equities to about 10 percent of assets from 120 percent earlier this year, that person said. Overall, the fund is net short equities, meaning it expects the value of shares to decline.

Dalio said in January that the bond market had slipped into a bear phase and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years. The current environment is good for stocks but bad for bondholders, he said at the time.

(Updates with Dalio’s market comments from January in final paragraph.)
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