It wasn’t a fantastic year for the world’s largest hedge fund firm, but Bridgewater Associates’ key All Weather fund did finish in solid positive territory in 2014, returning 8.6% net of fees, according to an investment report reviewed by Forbes.
The All Weather fund is an important part of billionaire hedge fund manager Ray Dalio’s Bridgwater empire, which manages some $155 billion. All Weather makes up about $80 billion of Bridgewater’s assets and employs a so-called risk-parity strategy that tries to consistently generate positive returns by leveraging up bond investments to balance out portfolios.
But in 2013, the strategy faltered and the All Weather fund was down by about 4% net. The All Weather fund’s 2014 rebound was lessened a bit by some end of year turbulence—the All Weather fund lost 2.5% in December. The All Weather fund’s annualized return over the last five years was 11.8%.
Meanwhile, Bridgewater’s big Pure Alpha hedge fund returned 3.6% net of fees in 2014, a year in which the U.S. stock market, as measured by the Standard & Poor’s 500 index, returned 13.7%. The annualized return of the Pure Alpha fund over the last five years has been 14.8%.
Still, most macro funds like Pure Alpha struggled in 2014 and some got hit particularly hard in recent days after the Swiss central bank unexpectedly removed the cap on its currency, sending the Swiss franc soaring against the euro. But Bridgewater’s Pure Alpha fund seems to have avoided these kinds of losses. The Pure Alpha fund has gained 4.4% so far this January. The Pure Alpha Major Markets fund, another Bridgewater hedge fund launched in 2010, has returned 7% in January. It returned 8.7% in 2014.
Speaking at the World Economic Forum in Davos on Thursday, CNBC reported that Dalio said that while the U.S. economy is currently fine, he is concerned that when a downturn comes central banks will have lost their ability to respond with robust monetary policy.
