Bridgewater Associates, the biggest hedge fund in the entire planet, allegedly positioned a $1.5 billion bet that could produce a massive windfall for the fund as well as its shareholders if the stock market plunged before the end of March.
The gamble, or hedge, that has been made in recent months and, as per the Wall Street Journal, it is focusing on a decrease in the S&P 500-stock index of the biggest United States-based companies. The Bridgewater hedge might also be able to repay if European stocks collapse and the U.S. market merely does not rise over the next 4 months, the news outlet stated.
The founder of Bridgewater, Ray Dalio, characterized the Journal as "wrong" on Friday in a post on LinkedIn. Dalio has not offered specifics on the trading of his company. Yet he told, Bridgewater wasn't "net short "and that characterizing him as a pessimistic on shares was not right. Net short implies that one has spent more cash in bets which would increase in value if the market drops than in bets that would increase in value with a rapidly increasing market
For a hedge fund, it is not unusual to put any bets that will increase in importance if the stock market tumbled. Many hedge funds make these bets, as the title indicates, even though they think the market will ascend in particular.
Nevertheless, Vineer Bhansali, Chief Investment Officer of the Long-Tail Alpha Hedge Fund, informed CBS MoneyWatch on Friday, that a huge investment fund has reportedly purchased an unexpected number of options over the span of a month which would pay off if the market falls. In the derivatives trading markets, he quoted personal reports from other vendors.
Bhansali estimates that if the market falls 20 percent overnight, Bridgewater's $1.5 billion bets could yield a $27 billion revenue. In the coming weeks or months, any payoff will diminish to zero by March 31.
Bhansali says he would interpret the reported trade in Bridgwater as a hedge, not just an explicit bet that the market would drop, but he said the size of the hedge was peculiar. "Seems like they hedge against some kind of major tail-risk," Bhansali told, alluding to the Wall Street term for a huge and unpredicted fall in the market.
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