‘Big Short’ hedge fund pulls out of $1.6bn bets against US market

Michael Burry, the hedge fund manager whose successful bets against the US housing market during the subprime crisis were immortalised in the 2015 movie The Big Short, has pulled out of $1.6bn in wagers against two exchange traded funds tracking the US market.

Burry’s Scion Asset Management closed out two short positions against ETFs tracking the S&P 500 and Nasdaq 100 indices between June 30 and September 30 in the form of $887mn and $739mn bets against the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ ETF, respectively, according to a recent filing with the Securities and Exchange Commission.

Strong starts to 2023 have allowed the $416bn SPY to climb 16.4 per cent and sent the $207bn QQQ up 42.3 per cent year-to-date, according to Morningstar. But over the third quarter of the year, the ETFs declined 3.2 per cent and 2.8 per cent, respectively. This indicates that Burry’s bets may well have paid off because second quarter 13F filings show the bets were in place at the end of that quarter.

Scion’s largest single position as of September 30 was a $47mn put option — offering the right but not the obligation to sell shares in the future — on the $9.2bn iShares Semiconductor ETF (SOXX), which has significant holdings in Advanced Micro Devices, Broadcom, Nvidia, Intel and Texas Instruments. SOXX is up about 42 per cent since January 1 and about 7 per cent since September 30, according to data from Morningstar.

Burry’s investment strategy is closely followed by investors due to the fame he continues to enjoy following the coverage of his success at the time of the subprime crisis and subsequent dramatisation of his role in The Big Short.

Burry’s portfolio has scaled down significantly with the retirement of the QQQ and SPY bets and now sits at about $99mn, near the $107mn of Scion reported holdings on March 30, according to the filings. The position against SOXX represents nearly half of Scion’s portfolio as of the most recent filing.

The changes to Scion’s portfolio were revealed in 13F filings, which are mandatory reports to the Securities and Exchange Commission by managers with assets of at least $100mn. They must be lodged with the regulator within 45 days of the close of the previous quarter, which was September 30.

The news that he had pulled out of broad market bets against US stocks came as 13F filings from Warren Buffett’s Berkshire Hathaway revealed it had slashed its positions in a number of blue-chip US companies in the third quarter.

An email to Scion was not returned. BlackRock, which owns the iShares suite of funds, declined to comment.