Several hedge funds used ETFs to make big directional bets on various financial markets in the third quarter, according to their latest 13F filings which disclose U.S. long equity-related positions on September 30.
For example, as of the end of the third quarter, the SPDR S&P 500 ETF Trust was Starboard Value’s largest U.S. common stock long position, accounting for 14.4 percent of the portfolio’s total assets. This is only the second time in recent years the activist hedge fund firm headed by Jeffrey Smith has made such a big bet on a broad-based exchange traded fund.
Also in the third quarter, George Soros’ family office, Soros Fund Management established a large new position in the Invesco QQQ Trust Series I, which consists of stocks in the Nasdaq 100 Index.
In addition, Chris Rokos’ Rokos Capital Management disclosed in its filing that it took a large new position in an iShares iBoxx investment-grade corporate bond ETF, making it the London’s firm largest U.S. long common stock position. The ETF tracks a market-weighted index of U.S. corporate investment-grade bonds across the maturity spectrum.
Bridgewater Associates last week disclosed that a little more than one-third of its U.S. common stock assets were invested in three previously held ETFs: an S&P 500 tracker, SPDR Gold Trust, and the Vanguard Emerging Markets Stock Index Fund. In addition, five of its six largest U.S. common stock longs were ETFs, accounting for about 40 percent of the U.S. common stock assets.
The only stock among the top six that’s not an ETF is Chinese e-commerce giant Alibaba Group.
ETFs have historically accounted for a large share of Bridgewater’s U.S. common stock assets.
Keep in mind, however, that Bridgewater’s U.S. stock portfolio was only valued at a little more than $8 billion, a fraction of the roughly $140 billion managed by the world’s largest hedge fund firm at the end of June.
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These are among the most interesting disclosures contained in the quarterly 13F filings made public last week, just before Monday’s filing deadline when most hedge funds must disclose their U.S. stock portfolios. It is not clear whether the funds are using the ETFs to make big market bets, hedge other positions, to park cash.
Several of these firms reported other interesting moves in the third quarter.
For example, Soros took a huge initial stake in Palantir Technologies, making the data intelligence operation its fifth-largest U.S. common stock long. Palantir went public September 30 in a direct listing.
Starboard also disclosed Corteva in its number two position, accounting for 9.4 percent of total assets. Last month Smith publicly made the case for the provider of agricultural seeds and crop protection chemicals, which DowDuPont spun out in 2019.
Starboard also more than doubled its position in ACI Worldwide, making the digital payments company its fourth-largest long. It owned 9 percent of the company, according to a disclosure last month.
Seth Klarman’s Baupost Group reported that it boosted the size of its U.S. stock portfolio by 15 percent to $9.2 billion over the previous quarter. In the third quarter, it took a large stake in Bill Ackman’s blank-check company, Pershing Square Tontine Holdings, making it the hedge fund’s sixth-largest long.
