Bridgewater Associates is one of the prominent hedge fund management firms. The firm has an optimistic view on the emerging markets (EDC) (IEMG). In 1Q16, Bridgewater Associates’ had 32.8% of its holdings invested in the Vanguard FTSE Emerging Markets ETF (VWO) and another 18.6% in the iShares MSCI Emerging Markets (EEM). Thus, Bridgewater’s sizable holding in emerging markets reflects its optimistic view.
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In 2Q16, the firm sold a minor portion of its holdings in the Vanguard FTSE Emerging Markets ETF (VWO). However, it still holds 70 million shares of this ETF. The firm had allocated 31.4% of its portfolio to its Vanguard FTSE Emerging Markets ETF (VWO) holding, which was worth $2.7 billion. Plus, the firm had allocated 16.8% to its iShares MSCI Emerging Markets (EEM) holding, which was worth $1.4 billion in 2Q16.
In 2Q16, the firm increased its position in the iShares MSCI Brazil Capped ETF (EWZ). This ETF tracks the performance of Brazilian equities. It was the firm’s largest buy in the second quarter of 2016. The firm is holding 4.2 million shares of the EWZ ETF, whose worth is $143.4 million, as of June 30, 2016. Bridgewater Associates is the eighth-largest investor in the EWZ ETF.
The upward movement in commodity prices has been driving Brazil’s equity market since mid-February to May 2016. In June 2016, we saw that the commodity prices showed a small drop in performance. However, Brazil’s equity market continued its strong performance despite the fall in commodity prices. EWZ has returned nearly 73% on a YTD basis as of August 22, 2016. The change in Brazil’s growth model has been driving its performance. The contribution of the service sector to its GDP has been increasing while the contribution of the industrial sector to its GDP has been declining. The increase in service sector contributions is driving the performance of the index. Read How Brazil’s Growth Model Is Shifting to learn more.
In the next part of this series, we will analyze the portfolio positions of Janus Capital Management as of June 30, 2016.