Dalio Will Lose on European Bank ‘Big Short,’ Algebris CEO Says

• February 19 2018
• Steven Arons, Gavin Finch

Billionaire Ray Dalio’s “big short” bet against Italian banks will cost him dear, according to Algebris Investments Chief Executive Officer Davide Serra.

Billionaire Ray Dalio’s “big short” bet against Italian banks will cost him dear, according to Algebris Investments Chief Executive Officer Davide Serra.

Serra said he sees “tremendous value” in the continent’s lenders, which will receive a “big margin expansion” once the European Central Bank starts normalizing policy and raising interest rates. “Profitability of Italian banks will go up strongly,” Serra said in a Bloomberg Television interview on Monday.

Dalio’s Bridgewater Associates, the world’s largest hedge-fund firm, has amassed a $22 billion bet against Europe’s biggest companies, including Italian bank Intesa Sanpaolo SpA. That lender’s shares have risen about 4 percent since the start of October, the month that Bridgewater disclosed its short position, indicating Dalio’s firm may have lost money.

London-based Algebris, on the other hand, has been betting on the nation’s lenders, with 20 percent of its 10 billion euros ($12 billion) of assets under management invested into Italian bank equity and credit as of September. Its holdings included UniCredit SpA, Intesa Sanpaolo and Banco BPM SpA, Serra said at the time.

Italy’s economic reforms are already paying off, with growth returning to the nation, Serra said. The upcoming elections won’t be disruptive to markets, he said.

— With assistance by Sonia Sirletti, and Francine Lacqua