Bridgewater Goes Deeper into Emerging Markets (EEM, EWZ, VWO)

Bridgewater Associates, LP is in the lead of the top hedge funds in America by size. We have just gotten a look at its equity holdings via a 13F filing with the Securities and Exchange Commission. The holdings are interesting when you consider that Bridgewater is one of the biggest hedge funds in existence and its market bets usually require high liquidity to get in and out of due to the fund’s vast size and its desire to remain nimble.

The 13F filing for Bridgewater shows that it has over $6.7 billion in equity and related assets. It was shocking that Apple Inc. (NASDAQ: AAPL) was NOT a holding this quarter. Even the quarter before, Apple was a mere 8,700 shares worth some $5.21 million in the portfolio. While it seems interesting that Apple has been dumped, there is a key change here worth noting. At some point during the June quarter it appears that Bridgewater decided to go big in emerging markets. In fact, it basically doubled up on its efforts in emerging markets.

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The iShares MSCI Emerging Markets Index (NYSEMKT: EEM) was listed as 21,523,900 shares worth $924 million on March 31 and this position was grown to 31,726,400 shares worth some $1.24 billion as of June 30.

The next big observation was in the Vanguard MSCI Emerging Markets ETF (NYSEMKT: VWO). This was some 30,864,022 shares worth more than $1.34 billion as of March 31, but this grew to 38,800,322 shares worth almost $1.55 billion as of June 30.

What is another show of force is that Bridgewater seems particularly bullish on Brazil. There was not a position at all at the end of March in the iShares MSCI Brazil Index (NYSEMKT: EWZ), but at the end of June the position was listed as 2,002,700 shares worth more than $103 million.

If you tally up just the ETFs that were listed in the Bridgewater holdings, the emerging market exposure in just these names grew by $600 million and the emerging market exposure in just these three ETFs was close to $3 billion. Chances are pretty high that if there is this much exposure in the ETFs for emerging markets that there are other instruments being used to get more size into emerging market equities.

JON C. OGG