Market bounce catches Bridgewater fund off-guard
Pure Alpha suffers 4.9% fall in year to June as equities and bonds rise
Bridgewater’s flagship fund suffered one of its worst first-half performances in two decades this year after being wrong-footed by rebounding markets.
The $150bn hedge fund group founded by Ray Dalio saw its Pure Alpha fund, which tries to surf macro-economic trends, lose 4.9 per cent in the six months to June as global equity and bond markets bounced on hopes of looser monetary policy.
The FTSE All-World equity index was up 15 per cent by the end of June, while the broadest global bond market gauge was up 6 per cent. The average “macro” hedge fund gained 5.2 per cent in the period according to HFR, a data provider.
The drop came after a strong year in 2018, when Pure Alpha delivered 14.6 per cent returns net of fees, while other managers struggled with market volatility.
One person close to Bridgewater said the fund had now pared some of its earlier losses, and is now down 1.45 per cent in the year to mid-July.
Bridgewater declined to comment on why its performance has fizzled this year, but the particularly poor performance in January — when Pure Alpha declined by 4.5 per cent — suggests that it went into the new year expecting further turbulence and instead suffered as the market recovered.
Bridgewater’s passively managed All-Weather fund, which in contrast to Pure Alpha aims to be largely immune from macro-economic shifts, rose 13 per cent through June.
Mr Dalio wrote last week about a “paradigm shift” in the global economy that Pure Alpha tries to navigate, characterised by tax increases, rock-bottom interest rates, central banks increasingly financing government deficits through money creation and subsequent devaluations — increasing the lustre of gold.
“History has shown us and logic tells us that there is no limit to the ability of central banks to hold nominal and real interest rates down via their purchases by flooding the world with more money, and that it is the creditor who suffers from the low return,” the 69-year-old investor said in a LinkedIn post on Wednesday.
Pure Alpha also had a difficult start to the year in 2009 and in 2016, according to data seen by the FT, but managed to claw back its losses in the second halves of those years.