The largest hedge fund in the world has reportedly staked more than $1 billion that global equity markets will fall during the next three months.

The wager placed by Ray Dalio's Bridgewater Associates would pay off for the firm if either the S&P 500 or the Euro Stoxx 50 or both decline, people familiar with the matter told The Wall Street Journal.

Dalio, however, took to social media later on Friday to dispute the report, saying on Twitter that "It’s wrong. I want to make clear that we don’t have any such net bet that the stock market will fall."

"I believe that we are now living in a world in which sensationalistic headlines are what many writers want above all else, even if the facts don't square w/ the headlines," he added. "You can believe me or you can believe The WSJ writer."

dalio tweet

Wall Street Journal spokesman Steve Severinghaus defended the paper's reporting in a statement to CNBC:

"The Journal's article is based on interviews with multiple sources and we stand by the conclusions we reported," Severinghaus said in an email.

"The article does not report, as Mr. Dalio says, that Bridgewater has a 'net' bearish position on the stock market. The article made clear that the trade could be a hedge for the firm's significant long exposure to equity markets, among other possibilities," he added.

The Journal said in its initial report that the bet uses put options — assembled over months by Goldman Sachs and Morgan Stanley — that give investors the option of selling stocks at a predetermined price by a given date.

The firm paid about $1.5 billion for the contracts, about 1% of Bridgewater's $150 billion in total assets under management, the report said.

"Though we won't comment on our specific positions we do want to make two things clear," Bridgewater said in a statement to CNBC. "First, the way we manage money is to have many interrelated positions, often to hedge other positions, and these change often, so that it would be a mistake to look at any one position at any one time to try to deduce the motivation behind that position."

"Second, we have no positions that are intended to either hedge or bet on any potential political developments in the U.S.," the firm added. Though Bridgewater wouldn't confirm the motivation behind the bearish bet, many investment strategists and investors alike have grown wary in recent weeks as all three U.S. equity indexes clinched new all-time highs.