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The world’s biggest hedge fund is also one of the best performers.

Bridgewater Associates, which manages nearly $120 billion, posted returns of 23 percent in 2011 — a year when the average hedge fund portfolio lost 5 percent.

Against the backdrop of fear over European debt and stagnant global growth, the hedge fund, led by one of Wall Street’s more enigmatic titans, Ray Dalio, sidestepped the mess. The fund did it with bets on United States Treasuries, German bonds and the Japanese yen, according to people familiar with the firm’s investment strategy, who spoke on condition of anonymity because the information is private.

Such performance adds up. Over the last 20 years, Bridgewater had annualized returns of 14.7 percent, amounting to $50 billion of gains for investors. Over the same period, the Standard & Poor’s index of 500 stocks returned about 8.7 percent a year.

A big chunk of Bridgewater’s gains came in recent years, a volatile period that felled many funds. As the financial crisis wreaked havoc, Bridgewater notched positive, albeit modest, returns in 2008 and 2009. The next year, the firm had gains of 45 percent versus about 10 percent for the average hedge fund.

The firm has managed to post big numbers even as assets have swollen, defying conventional wisdom and industry experience. Investors poured money into Paulson & Company in recent years, after the founder, John Paulson, earned billions of dollars betting against subprime mortgages. Assets at Paulson topped $38 billion at the beginning of 2011, but many of his portfolios suffered last year, with one of the main funds losing 50 percent.

Bridgewater has been able to avoid that fate, in part, because it follows a go-anywhere strategy. The fund’s managers assess the political, economic and regulatory environments around the world, and then make bets using commodities, currencies and other assets.

http://dealbook.nytimes.com/2012/01/26/in-punishing-year-for-hedge-funds-biggest-one-thrived/