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Not only does the filing reveal Dalio backing US equities markets, but it represents a doubling down of Dalio’s faith in the Chinese economy.
Dalio’s strategy focuses on diversification and trying to remove bias in trading — although the veteran hedge fund manager is susceptible to the occasional blunder, with Bridgewater’s flagship fund dropping 20% in March as the coronavirus wrongfooted Dalio.
That only makes Bridgewater’s most recent quarterly filing all the more interesting, as investors analyse how Dalio has shifted his trading strategy.
Ray Dalio’s Bridgewater Associates’ Q2 buys
1. SPDR S&P 500 ETF Trust (SPY)
The SPDR S&P 500 ETF accounts for a whopping 26.1% of Ray Dalio’s holdings. With over 5 million shares in the ETF, Dalio looks to be betting heavily on US equities. In the last reporting period Bridgewater Associates increased its holdings by 41% for a market value of $1.55bn. As the name suggests, the ETF gives investors a broad exposure to the underlying S&P 500. Year to date, the ETF has gained around 9%, matching the performance of the S&P 500.
2. SPDR Gold Trust
Diversification is key to Dalio’s investment strategy, and last quarter saw the hedge fund manager buy into gold. Bridgewater Associates upped its stake in the SPDR Gold Trust by 3.4%, bringing the value of its total holdings to over $914m. Typically, the yellow metal tends to shine through periods of economic uncertainty. That rule of thumb is certainly reflected in the performance of the SPDR Gold Trust this year, which has increased over 28% since March.
3. iShares China Large-Cap ETF (FXI)
Dalio has said that, given China’s growth prospects, not investing in the country would be “very risky”. Dalio has been visiting the country since 1984 and suggests investing in China now is comparable to investing in Britain during the industrial revolution.
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That makes it no surprise that in the most recent quarter Bridgewater Associates has upped its holding in the iShares China Large-Cap ETF. The ETF provides access to the 50 largest companies in China in a single fund. In 2019 the fund delivered a 13.74% return, although as of 30 June the fund was down 7.84% so far this year.
4. Alibaba [BABA]
Bridgewater Associates has been backing Chinese tech giant Alibaba since 2018. In the most recent quarter, Bridgewater upped its holdings in Alibaba by 241.75%. The Chinese tech giant is the biggest single equity holding Bridgewater has, accounting for 4.5% of its portfolio and a market value of over $268m.
Alibaba’s share price has soared 35.6% this year to date (as of 1 September’s close). The pandemic-induced acceleration in the shift to e-commerce has fuelled Alibaba’s growth, with quarterly earnings topping analysts’ expectations. Among the 47 analysts tracking the stock on Yahoo Finance, Alibaba has an average $301.53 price target. Hitting this would see a 1.2% upside on the current share price through 1 September’s close.
5. iShares MSCI China (MCHI)
China once again features: Bridgewater Associates’ fifth top buy for Q2 is the MCHI iShares MSCI China ETF. Tracking Chinese mid- to large-scale companies, this ETF was up 3.2% as of 30 June. In the quarter, Bridgewater increased its stake by just over 2%, seeing the ETF become Bridgewater’s eighth biggest holding overall.
Dalio isn’t alone in thinking China is a good bet right now. In the recent Q3 CNBC Global CFO Council Survey, the CFOs polled had a more positive outlook for China’s economic recovery than that of the US. This is reflected in IMF forecasts that expect China’s GDP to grow by 1% this year, while the US is expected to decline by 8%.
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