Bridgewater’s flagship fund falters as another thrives

Ray Dalio, Bridgewater Associates

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Ray Dalio

Bridgewater Associates’ flagship hedge fund dropped about 12% through the end of June, according to people familiar with the firm. That marked the worst start to a year for the Pure Alpha fund since 1995. Pure Alpha bets on and against markets worldwide in an effort to stay ahead of macroeconomic trends.

Meanwhile, the firm’s slightly smaller All Weather fund rose 10%, according to these people. All Weather uses a risk-parity strategy intended to adapt to a number of market conditions.

It wasn’t clear exactly how much Bridgewater gained or lost in dollar figures, as the firm runs permutations of its funds that use borrowed money and other trading strategies to amplify bets.

Pure Alpha is the firm’s largest fund, amounting to about 45% of the firm’s roughly $ 150 billion under management, according to a person familiar with the matter. All Weather encompasses about 40% of the asset base, this person said. A fund that blends the two approaches accounts for the remainder.

Institutional Investor’s Alpha trade publication reported Bridgewater’s June performance figures Wednesday.

Bridgewater’s billionaire founder, Raymond Dalio, has been outspoken in predicting an eventual economic crunch. In a client note this spring reviewed by The Wall Street Journal, he said “the global economy is slowly moving toward an inflection point” that will be reached within the next year.

In that note, he repeated his longtime thesis that persistent low central bank interest rates will be increasingly ineffective in boosting economies worldwide.

And yet the S&P 500 is up 4% this year, including dividends, despite volatility that followed Britain’s vote to exit the European Union last month.

The average hedge fund lost about 1% through June 30, according to early estimates from researcher HFR.

But Bridgewater is hardly the average hedge fund firm. Not only is it the largest by assets, but it has made more money for its clients than any other hedge fund in history, according to asset manager LCH Investments. Its clients include some of the world’s largest sovereign wealth funds and pension funds.

Before this year’s losses, Pure Alpha reported an average annualised return of 13%, after fees. Backers continue to line up to hand over more money, as there is an extensive waiting list of prospective investors into the fund, people familiar with the fund said. It has risen every year since 2000.

Automated, computer-driven approaches similar to All Weather did well in the immediate wake of Britain’s vote last month, benefiting from longstanding bets on a strengthening US dollar.

The Salient Risk Parity Index is up 19% this year, off a 12% loss in 2015.

This year’s positive performance for such funds follows a period last fall when some rivals blamed risk-parity funds for selling their portfolios all at once in a market swoon, exacerbating a downturn.

Dalio, who is credited with helping invent the risk-parity strategy decades ago, took the unusual step afterward of publicly defending the approach as a worthy long-term performer. He has indicated that the majority of his net worth is invested in Bridgewater’s risk-parity funds.

Write to Rob Copeland at

This story was published by The Wall Street Journal

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