April 17, 2021

About the fattest hedge fund, Bridgewater.

As part of market research, surf the internet for information on the best and most outstanding.
Well, at the same time I collect and arrange text for a smartlab and a blog in a telegram, mb who will be interested to read.

Today, about the largest hedge fund in the world, about Bridgewater Associates, and by the way I read another book of this billionaire, “Principles”, I’ve been very good at it.

Story

The history of the company includes innovative industrystrategies such as hedging, alpha and beta strategies, creating investment portfolios with absolute income and risk parity. According to Financial News, the company was the fastest growing in the world from 2000 to 2005, until it stopped accepting new customers. The company's assets increased by 25% each year during the decade 2001-2010. Moreover, the number of employees was eleven times higher than the 2000 level.

Bridgewater Associates was foundedRay Dalio in 1975 at the office, which was the room in his apartment in Manhattan. At that time, the business consisted solely of advising corporate clients and managing domestic and international currency and interest rate risks. The firm later changed its focus and began selling economic advice to governments and corporations such as Nabisco and McDonald’s.

Features

In 2005, when the company hired hundreds of new employees, Dalio decided to create a training manual called “Principles "(principles), which was common among allemployees. This publication is said to be part of a self-study book, a money management guide, and a treatise on the nature of natural selection that rules in a business environment. According to one trade magazine, six years after the publication of “Principles»The rapid expansion of the company led to the creation of"Strange company culture." The company acknowledges that employees “often experience cultural shock” when they start working there, and Dalio admits: “This is not for everyone.” According to the company’s website, employees are encouraged to be persistent, and discussions about disagreements and mistakes are considered a deliberate part of the company’s culture, as they stimulate both training and progress.

All meetings are recorded and can be viewed.any employee if the topic of the meeting is not private. In addition, Dalio says that he supports the “extreme meritocracy of ideas” (the one who is most capable or useful survives) and argues that decisions are made regarding investments without taking into account the hierarchy. He says that any employee can respectfully say something to someone in the company, but he should be prepared for the fact that he will be given an answer. The horizontal corporate structure of the company aims to remove the barriers associated with traditional asset management firms.

Structure

The company offers its customers the services of three hedge funds: a fund Pure alpha fund All Weather and fund Pure Alpha Major Markets. The company also publishes a whitepapper called "Daily Observationsthat investors are subscribed to.

Pure alpha

Bridgewater Associates Launches Its First FundPure Alpha in 1989. The foundation described its approach as a "diversified alpha strategy." It was designed to balance the risk between various uncorrelated assets through active management. It includes from 30 to 40 simultaneous trading positions on bonds, currencies, stock indices and commodities in order to avoid the influence of price movements of market sectors.

All weather

The second fund, dubbed All Weather, wascreated in 1996 and attracted attention with its low commissions, inflation-linked bonds and fixed-income investments. The purpose of the fund was to create a “high risk-adjusted return” that exceeded the return of the general market. The All Weather fund contained capital of more than $ 46 billion and was one of the largest funds in the USA in 2011. In April 2009, after the collapse of Lehman Brothers, the fund switched to a “safe portfolio” regime, which included nominal and inflation-linked bonds, gold instead of stocks, debt from developing countries and goods. The fund held 40% of inflation-related bonds, 30% of treasury bills, 20% of treasury bonds and 10% of gold.

Pure Alpha Major Markets

Pure Alpha Major Markets was established in 2011 with$ 2.4 billion in capital from customers who have already worked with the company. In the summer of 2011, the fund was opened for a group of external investors who invested $ 7.5 billion in the background. At that time, it was the largest hedge fund launch. The fund was created to provide an investment tool similar to the Pure Alpha fund, but with increased liquidity by focusing on major markets such as European bonds. The launch of this fund in 2011 brought the company more than $ 100 billion.

Strategy

Separation of alpha and beta investments

The company divides its investments into two main categories:

  • Beta investments whose income is generated through passive management and standard market risk;
  • Alpha investments that aimmaking higher profits, which are not connected with the general market, and are actively managed. The principle of separation of alpha and beta investments was introduced by Dalio in 1990 and has been recognized by other managers since 2000. It is reported that the company became the first hedge fund to use alpha and beta investment strategies and special investments.
  • Systematic diversification

    According to Bloomberg, Bridgewater usesan investment system that combines traditional diversification with “betting on or against markets around the world” and tries to invest in instruments and markets that “don't keep up” with each other. To manage their investment strategies, the top management of the company compiled hundreds of “decision-making rules”, which are an extended continuation of the firm’s training manual “Principles”, Also these investment recommendations were used in the company's software systems.

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    P.S. My telegram blog is about how I build my international hedge fund. Research, deals and challenges along the way. t.me/drsombre