World’s largest hedge fund puts down $13 billion to profit from trouble in Europe.
A lot of people have lost a lot of money in the recent financial market turmoil, but there’s still plenty of money to be made by betting against vulnerable companies, as the world’s largest hedge fund, Bridgewater Associates, showed this week. It bet heavily against four of Spain’s biggest corporate hitters. The fund took up short positions worth €1.2 billion, or 0.5% of total shares at Banco Santander, BBVA, Telefónica and Iberdrola.
The gamble has already reaped dividends. Shares of Iberdrola, Spain’s biggest utilities company, Telefonica, Spain’s struggling telecoms giant, and Santander, Spain’s biggest bank ended the week around 5% lower, while BBVA tumbled 4%. Bridgewater placed its best against the two large Spanish banks last week, just as they presented annual results that largely disappointed the market. Since then, both banks have lost close to 10% of their market cap.
These short bets are part of the firm’s $13.1 billion in shorts against 44 European companies, according to EU regulatory filings, reported by Bloomberg. Among the notable short positions, in addition to the Spanish banks, are Total, Airbus, BNP Paribas, ING, Intesa Sanpaolo, Eni, Sanofi, and Axa.
At the beginning of the week, Ray Dalio, founder of Bridgewater Associates, made light of the recent rout in global stock markets saying in a blog post on LinkedIn that “this is classic late-cycle behavior,” adding: “These big declines are just minor corrections in the scope of things . . . There is a lot of cash on the side to buy on the break, and what comes next will be most important.”
Investors will nonetheless be wondering why the world’s biggest hedge fund is shorting Spain’s two biggest banks, whose shares had been on an 18-month roll…