World’s biggest hedge fund bets €6.9bn against Europe
THE world’s biggest hedge fund has made a €6.9bn (£5.9bn) bet against some of the biggest businesses in Europe as recession looms.
US fund Bridgewater Associates, which has $150bn in assets under management, has emerged as the biggest short seller of European stocks.
New disclosures show it has made bets totalling €6.9bn against almost half the Euro Stoxx 50 Index, dominated by French and German businesses.
Bridgewater, run by famed Wall Street investor Ray Dalio, is shorting well-known European banks including Dutch lender ING, Spain’s Santander and France’s BNP Paribas.
It has also taken short positions at major industrial companies such as French construction business Vinci and German chemicals giant BASF.
“These new big shorts from Ray Dalio make all other whale trades look like shrimp trades” said Ivan Cosovic, founder of data and analytics firm Breakout Point. The positions were all put on since the start of the week amid pessimism about the state of the European
economy. Bank of America this week said half of global money managers are now predicting recession in Europe within the next 12 months.
In total, the hedge fund is betting against 22 of the 50 companies listed on the Euro Stoxx 50 Index. Bridgewater’s biggest bets are against Spanish utility company Iberdrola and French healthcare company Sanofi.
Mr Cosovic said: “If it is indeed Stoxx Europe 50 Index related, then they are most probably short the rest of the index as well, they just didn’t cross the threshold yet.” Short positions are when an investor borrows a share, sells it on the open market, and expects to buy it back later for less money.
It is one of the ways in which hedge funds manage risk and protect their portfolios in a down market.
It is not clear whether these recent transactions are part of a hedging strategy – to offset losses – or an opportunistic play to profit from expected declines.
Mr Dalio told La Repubblica Bridgewater is buying assets that offer protection against inflation, while steering clear of debt and countries at risk of domestic strife or war.