| Raymond Dalio, Bridgewater Associates (Bloomberg) |
The performance of some high-profile hedge funds managed by Bridgewater Associates, the world’s largest hedge fund firm, continued to diverge last month.
The firm, founded by Raymond Dalio and headquartered in Westport, Connecticut, extended losses in its largest fund in June. That fund is now off by double digits for the year. Meanwhile, the firm posted further gains in its so-called risk parity fund.
Specifically, Pure Alpha II lost about 2.70 percent in June. As a result, it is now down nearly 12 percent in the first half of the year.
On the other hand, the firm’s All Weather fund gained about 4.50 percent in June and is now up more than 10 percent for the year. This also makes All Weather one the best-performing hedge funds in general this year.
Pure Alpha II, a mostly quant fund, invests in a large variety of financial markets. It started off the year up nearly 1 percent in January but plunged about 5 percent the following month. It has lost money for five straight months now.
Pure Alpha is Bridgewater’s flagship strategy, launched in 1991. It managed approximately $65 billion at the start of the year. The firm stresses that the strategy has little correlation to the stock market indexes. The strategy returned 4.7 percent last year, while a subset -- Pure Alpha Major Markets -- gained 10.6 percent. This compares with a 0.70 percent decline for the Standard & Poor’s 500 stock index.
Since inception and through year-end, Pure Alpha has compounded at 12.8 percent annualized. It has suffered just three losing years net of fees and one losing year gross of fees. According to Bridgewater, over its 25-year history Pure Alpha made money in 17 of the 27 negative quarters for the S&P 500.
In the past, Dalio has described All Weather as “a strategic asset allocation mix, not an active strategy.” It was designed to perform in all market environments. It is said to have benefitted from this year’s huge rally in the bond market, as interest rates continue to drop to new decades-long lows. Last year, however, All Weather finished the year down 7 percent. The firm’s All Weather 12% fund managed $5.7 billion as of January 1.
Bridgewater has been the world’s largest hedge fund firm for the past six years. It started the year with $104.2 billion under management, up more than 16 percent from $89.6 billion the previous year.
