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Dalio's Bridgewater Doubles Brazil ETF Stake

By: Benzinga
Posted: 2/14/2013 12:37:00 PM
Referenced Stocks: EEM;EWZ;PBR;VWO

After reducing its stake in the ETF during the third quarter, Ray Dalio's Bridgewater Associates more than doubled its interest in the iShares MSCI Brazil Index Fund (NYSE: EWZ ) in the fourth quarter, according to a 13F filing with the Securities and Exchange Commission.

The filing, released Wednesday after the close of U.S. markets, indicates Bridgewater now holds more than 2.85 million shares of EWZ , the largest ETF tracking Latin America's largest economy. Bridgewater's 13F for the third quarter of 2012 showed the world's largest hedge fund owned 1.15 million shares of EWZ at the time .

Bridgewater snatching up more EWZ in the fourth quarter is obviously a departure from what was seen in the third quarter, when the hedge fund pared its stake in the ETF by about 850,000 shares . Bridgewater initiated its position in EWZ in the second quarter of 2012.

In the second quarter of last year, Bridgewater purchased just over two-million shares of EWZ at around $56 . Without confirmation from Dalio or Bridgewater, it is just speculation, but it appears the firm did some dollar-cost averaging with EWZ in Q4 as the ETF never traded above $56 during the quarter. With the ETF now hovering around that price area, Bridgewater may be showing a profit on the position.

Even with a stake of over 2.85 million shares, Bridgewater owns a scant percentage of the 161.1 million shares outstanding EWZ currently has .

More noteworthy is the fact Dalio is invested in EWZ at all. Last year, EWZ was by far the worst performer of the four major ETFs tracking the BRIC nations. Year-to-date, EWZ has slid about 1.7 percent, due in large part to the slack performance by Petrobras (NYSE: PBR ).

Petrobras, Brazil's state-run oil company, is EWZ's largest holding as two securities issued by the company combine for over 12 percent of the ETF's weight. That is not good news as Petrobras is extending its run as the worst-performing major global oil stock. In the past month alone, the shares have plunged 18 percent.

Perhaps curiously, Bridgewater has increased its exposure to Brazil (and Petrobras) in another way. At the end of Q3, the hedge fund owned over 3.33 million shares of the iShares MSCI Emerging Markets Index Fund (NYSE: EEM ), the second-largest emerging markets ETF by assets. The Q4 13F indicates Bridegwater's stake in that ETF jumped to over 5.67 million shares.

Petrobras is the eleventh-largest holding in EEM and Brazil is the third-largest country weight at 12.7 percent. But wait, there is more.

At the end of the third quarter, Bridgewater held more than 4.92 million shares of what is now the Vanguard FTSE Emerging Markets ETF (NYSE: VWO ), the largest emerging markets ETF by assets. The hedge fund held over 6.73 million shares of VWO at the end of last year.

Currently, VWO is tracking a transition index as it prepares to go over to the FTSE Emerging Markets Index later this year. That index features Petrobras as its fourth-largest holding and a 15.71 allocation to Brazil, according to FTSE data .

For more on ETFs, click here .

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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