Dalio’s Bridgewater Added China ETFs, Cut Gold Funds in 2Q

Dalio’s Bridgewater Added China ETFs, Cut Gold Funds in 2Q

Hedge fund firm also continued to trade SPY for the cheaper IVV ETF.

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Reviewed by: Lisa Barr
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Edited by: Ron Day

Ray Dalio’s Bridgewater Associates, the world’s second-largest hedge fund, expanded its holdings of two major China ETFs, cut shares of gold funds and continued to trade SPY for the cheaper IVV in the second quarter. 

The iShares Core S&P 500 (IVV) and the iShares Core MSCI Emerging Markets ETF (IEMG) rank as Bridgewater’s top holdings, each accounting for 5.5% of the fund, according to its second-quarter 13F filing.  

The firm has been slowly cutting shares of the SPDR S&P 500 ETF Trust (SPY), which it has owned since 2006, in favor of IVV, which it began accumulating in large numbers around 2017. In the second quarter, it cut about 200,000 shares of the more expensive SPY for a similar number of IVV.  

With Dalio as a longtime supporter of investing in China, Bridgewater bought over 2 million shares of the iShares Trust - China Large-Cap ETF (FXI) and about 650,000 shares of the iShares MSCI China ETF (MCHI), increasing the value of its stakes in those ETFs by $56 million and $32 million, respectively.  

Despite his bullishness, Dalio, who founded Bridgewater in 1975 and now serves as senior investor, recently told Bloomberg News that the firm was due for a big debt restructuring. He followed this up last week with a LinkedIn post that discussed the need for a “Beautiful Deleveraging” from China to deal with its debt. Despite these warnings, Bridgewater’s ETF picks for 2Q were bullish on China. 

Bridgewater also sold all of the firm’s 887,000 shares in the SPDR Gold Trust (GLD), and 1.8 million of its 1.9 million shares of the iShares Gold Trust (IAU). That brought the value of its gold ETF holdings to just $3.5 million in 2Q, down from $231 million in 1Q.   

 

TickerFundValue 2Q 2023 ($M)Number of Shares 2Q 2023Value 1Q ($M)Number of Shares 1Q
IAUiShares Gold Trust3.594K691.9M
IEMGiShares Core MSCI Emerging Markets ETF88418M87218M
EWZiShares MSCI Brazil ETF0.516K0.310K
EEMiShares MSCI Emerging Markets ETF29730K22551K
LQDiShares iBoxx $ Investment Grade Corporate Bond ETF 105970K106968K
FXIiShares China Large-Cap ETF883.2M321.1M
HYGiShares iBoxx $ High Yield Corporate Bond ETF0.811K1.621K
MBBiShares MBS ETF1361.5M1391.5M
IVViShares Core S&P 500 ETF 8982.0M7521.8M
MCHIiShares MSCI China ETF641.4M32648K
SPYSPDR S&P 500 ETF Trust4591.0M5051.2M
VWOFTSE Emerging Markets ETF3207.8M3428.5M
JNKSPDR Bloomberg High Yield Bond ETF 0.43.8K0.77.5K
GLDSPDR Gold SharesN/AN/A162887K

 

The reasons for Bridgewater’s purchases aren’t disclosed in the filings, and the company didn’t respond to requests for comment. Also, whether or not the fund still owns them isn’t clear since the documents cover only the second quarter. Still, hedge funds buy and sell ETFs for a variety of reasons, including hedging to prevent losses from other investments. 

“Hedge funds often use ETFs in pair-type trades, going long on an ETF and shorting some stocks or vice versa,” said James Seyffart, ETF research analyst at Bloomberg. “This means we don't know exactly how these ETFs are positioned in their overall portfolios particularly because 13F's don't show us short positions.” 

That means that while the purchases of FXI and MCHI are bullish, Dalio’s warning about China’s debt means there may be shorts investors aren’t seeing. Out of Bridgewater’s $197 billion in assets, the 13F only reports $16 billion, so it only shows a fraction of the hedge fund investments. 

 

Contact Gabe Alpert at [email protected] 

Gabe Alpert is a former data reporter at etf.com with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.