over 3 years ago • 2 mins
The world’s largest hedge fund is facing its heftiest losses in a decade – but its founder’s easily replicable model portfolio has pulled through the pandemic much more profitably 👀
Ray Dalio’s Bridgewater Associates manages $148 billion for investors. Much of that is pooled in its “Pure Alpha” fund, which aims to beat benchmark returns by both buying and “shorting” a wide variety of investments. This approach has previously paid off big time when wider markets have fallen – but it’s tougher to make such extraordinary gains when markets are rising overall.
In fact, Bridgewater’s flagship fund narrowly posted its first annual loss of the millennium in 2019 even as the US stock market rose 31%. And things have gone from bad to worse in 2020: the fund’s value has fallen 19% this year. Bridgewater has also lost 50 clients; its investors have overall withdrawn $3.5 billion more than they’ve put in.
Rivals such as Brevan Howard have meanwhile managed to make double-digit gains; but Bridgewater, after getting burned in March’s market meltdown, was reportedly slow to buy back into stocks’ subsequent rise. The firm’s approach is also less data-driven than many modern competitors’ – but simplicity can sometimes bring benefits… 😎
Even accounting for high fees, Pure Alpha investors have on average enjoyed a 10% annual return over the past 30 years – so many aren’t jumping ship just yet. Bridgewater has also bounced back from big losses before: the firm followed up >20% annual losses in 2000 and 2008 with >20% annual gains in the subsequent two years.
For better or worse, ordinary “retail” investors can’t invest in Bridgewater’s funds – but they can follow its founder’s advice for free. As detailed in our Invest Like Ray Dalio Pack, the famous “All-Weather Portfolio” (AWP) allocates 30% to stocks, 55% to bonds, and 15% to commodities in a bid to make money in any circumstances. And unlike Pure Alpha, it’s done just that in 2020:
As the above image shows, the AWP has consistently delivered strong returns – and can be easily set up through simple (and cheap) exchange-traded funds.
With recent weeks demonstrating that over-reliance on a few shiny tech stocks can be dangerous, Ray Dalio’s model principles – if not his hedge fund’s current performance – may hold a renewed attraction 🕺
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.