Hedge fund chief Ray Dalio bets billions against the Dax

It is a historically unique crash: in mid-February the Dax was still at its all-time high of almost 13,800 points – then it lost more than a third of its value within a few weeks. The corona crash is the fastest crash that the most important German stock market index has ever experienced.

If it were up to Ray Dalio, then the downward slide of the German stock corporations would probably like to continue a bit. The head of the world’s largest hedge fund Bridgewater is currently speculating with short sales on a loss in value of European stocks. According to Handelsblatt, he wagered 3.3 billion euros last week against twelve German titles alone. The highest bets were against SAP (around 900 million euros), Allianz and Siemens (almost 500 million euros each). Bridgewater also saw falling prices at Daimler, Deutsche Börse, Deutsche Post, Deutsche Telekom, Fresenius, Munich Re, Bayer, BASF and Adidas.

14 billion euros on falling prices in Europe

The speculation with short sales works like this: First, the speculator – in this case Bridgewater – borrows shares in the company, in which he hopes that the price will fall, and immediately sells them on. When the loan ends, he has to buy back the shares on the market in order to be able to return them. In the meantime, the more the price has fallen, the cheaper it can buy and the higher the profit. Conversely, losses are just as possible, and there is also a rental fee.

Because bets are high-risk, restrictions on financial investment regulations apply to ordinary investment funds. Hedge funds, on the other hand, can also bet with very large sums. Bridgewater boss Dalio speculates with high stakes not only on a loss in value of German shares, but also against other European stocks. Since March 12, Bridgewater has put the equivalent of 14 billion euros in falling prices of European stocks, the business intelligence service Bloomberg has calculated. And the recent short sales of some DAX stocks were not included.

Corona virus caught Dalio on the wrong foot

Dalio’s hedge fund empire is known for generating profits even in crises. Even the devastating financial crisis year of 2008 ended with a plus. But whether this repeats itself in the Corona crisis seems uncertain. Because the virus caught even the legendary Dalio on the wrong foot, as he admitted in an interview with the “Financial Times”.

“We didn’t know how to navigate the virus,” said Dalio, which is why they waited at first and did not sell securities. An expensive hesitation: Bridgewater’s most important fund lost around 20 percent at the beginning of the corona crisis. “We are disappointed because we should have made money instead of losing money like we did in 2008,” said Dalio.