Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view.
Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world’s biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Mr. Prince describes those economies—the U.S. and Europe, in particular—as “zombies” and says they will remain that way until they work through their mountains of debt.
“What you have is a picture of broken economic systems that are operating on life support,” Mr. Prince says. “We’re in a secular deleveraging that will probably take 15 to 20 years to work through and we’re just four years in.”
In Europe, “the debt crisis is [a] long ways from over,” he says. The economic and financial morass will mean interest rates in the U.S. and Europe will essentially be locked at zero for years.
In this bleak environment, Mr. Prince says stocks remain vulnerable to “air pockets” from shocks, such as bad news out of Europe. But for longer-term investors looking out over the next decade, he says, equities may be a good buy. There is even money to be made in U.S. Treasurys, despite interest rates near record lows, and gold is likely to resume its climb as central banks print money to bolster their economies. Mr. Prince says.
The views of Bridgewater are keenly watched by other investors, given the firm’s elevated status in the competitive world of hedge-fund investing. Bridgewater’s flagship Pure Alpha Strategy fund is considered one of the top funds in the world. As of the end of November, it was up 25% since the start of the year, according to people familiar with the situation. The average macro fund had lost 3.7%, according to Hedge Fund Research.
Currently, the fund is positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bond markets, Mr. Prince says.
In 2011, it profited from owning gold, but cut back on that position during the third quarter. It correctly pivoted from being bearish on U.S. Treasurys early in the year to positioning for a rally. It also benefited from rallies in core European bond markets and avoided ugly losses sustained by other macro funds that had bet the euro would fall against the dollar. Instead, it rightly bet that the euro would fall against the Japanese yen.
Founded in 1976 by Ray Dalio, Bridgewater manages $125 billion and has 1,400 employees. Mr. Prince, 53 years old, joined in 1986.