| Raymond Dalio, Bridgewater Associates (Bloomberg) |
A slide show accompanying Bridgewater Associates’ first-quarter client conference call provides some detailed insight into how the world’s largest hedge fund firm views the wide range of markets that it invests in via its largest fund, Pure Alpha.
In the slide show, the Westport, Connecticut, firm, headed by Raymond Dalio, lays out the management team’s “key views” on 21 different markets in six asset classes and explains whether the management team is slightly bullish, moderately bullish, strongly bullish, slightly bearish, moderately bearish, strongly bearish or just neutral on each.
Pure Alpha (18 percent volatility) has had a rough go of it lately. It fell 7 percent in the first quarter and was down nearly 9 percent through April. Still, it has enjoyed a 12.3 percent annualized return since its 1991 inception.
Pure Alpha Major Markets (21 percent volatility) declined 8 percent in the first quarter. All Weather, the firm’s risk parity fund, returned 2.3 percent in the first quarter.
Bridgewater told clients that looking out over the long term, it thinks high levels of debt and low interest rates will limit future growth and asset returns. “Monetary policy and asset returns are skewed,” it added.
Bridgewater told clients that since exchange rates are an important policy lever, the currency the investor holds “will probably be more important than the assets you hold.”
That said, looking over the short term, Bridgewater told clients it still foresees easy monetary policies since the global economies are “not too hot or too cold and inflation is below target everywhere.”
Against this backdrop it is interesting to see how Pure Alpha is set up. For example, within the currency markets, Bridgewater is “moderately bullish” on the Brazilian real, Mexican peso and Indian rupee. It is “moderately bearish” on the euro, pound sterling, Canadian dollar and Swiss franc. It is “slightly bearish” on the Japanese yen and Australian dollar. Interestingly, the U.S. dollar was not one of the markets on which it had a “key view.”
When it comes to short-term rates, Bridgewater is neutral on the developed world. It is negative on four different bond markets that it singles out. It is “moderately bearish” on the UK and “slightly bearish” on the U.S., Japan and Germany.
In credit, it is “slightly bullish” on the developed world’s corporate paper but “slightly bearish” on developed sovereign and emerging-markets sovereign paper.
In equities, Bridgewater is mostly upbeat on markets outside the U.S. It points out it is “moderately bullish” on Japan, England and emerging markets. At the same time, it is “slightly bearish” on the U.S.
Bridgewater is also neutral on the commodities markets in general.
