Last month, Ray Dalio’s Bridgewater added fuel to the vol implosion flames when it emerged that his publicly disclosed European short basket had grown to a massive $22 billion (shown below), making it the largest known short bet by the world’s biggest hedge fund. It also prompted substantial defensive commentary by European politicians and asset managers who warned that Dalio will be proven wrong on his bearish take of Europe (so far he has been spot on).
Meanwhile, others have noted that without knowing the bigger picture, or what strategy this particular bearish bet was part of, it was impossible to guess what Dalio’s true intentions were vis-a-vis Europe’s largest corporations.
Today, the head of investment research at Bridgewater, had had enough, and said the perception of the firm’s recent wagers against certain European equities is all wrong.
Speaking on Bloomberg TV, Karen Karniol-Tambour said that “the public perception of our bets is extremely misleading. We take views on a whole range of markets and implement them through a whole range of instruments, and anything that’s disclosed is actually a very, very small subset of those instruments in those markets where we have disclosure requirements.”
This lends credence to the view that the short, which has over the past month declined to $19.65BN, is likely part of a larger pair trade, which is not necessarily bear and may in fact be directionally agnostic. However, nobody really knows what Bridgewater is thinking, as only Bridgewater clients and executives (a very small handful of them) are privy to the firm’s full range of investments, which as Bloomberg notes, may include long positions that it hasn’t had to disclose.
It also may have purchased call options or used other derivatives to make sure it benefits from positive developments in the Eurozone.
“Understandably, you’re looking at a very, very thin slice that doesn’t really represent the holistic set of positions, and often it’s just one side of a trade, and so you’re really seeing something that gives a misleading picture of what our views really are,” said Karniol-Tambour.
Translated: Bridgewater would really like for you to stop talking about its $20BN gross short which, when all is taken into account, is likely really a long. Or maybe not; nobody knows. After all, if Ray Dalio has demonstrated anything this year, it has been a tremendous ability to flip-flop on strong positions, first mocking cash holders just as the market hit all time highs, saying they would “feel pretty stupid” only to recant two weeks later after the biggest market crash in years, stating in a blog post that “everything changed.”