The existing global economic instability and the on-going financial crises in the Europe had negative impact on the performance of many corporations and hedge-fund firms including Ray Dalio’s Bridgewater Associates, the world’s largest hedge-fund company.
Michelle Celarier of the New York Post reported that Pure Alpha, the flagship hedge-fund of Bridgewater Associates is down by 2.7% during the first two quarters of 2012. The hedge fund has been outperforming its peers in the hedge-fund industry for the past two years.
In 2011, Bloomberg Magazine featured the top 20 best performing large hedge-fund companies wherein Pure Alpha 1 and Pure Alpha 2 were included in the list. Pure Alpha 2 ranked number 3 with 53 billion assets and a return of 23.5 percent while Pure Alpha 1 landed 15th place with 11 billion assets and a return of 14.9 percent. Pure Alpha 1 and Pure Alpha 2 also reported $352.7 million and $2.5 billion net profits respectively.
Bridgewater Associates manages around $120 billion global investments, making it the largest hedge fund in the world. Over the past 20 years, the firm produced average returns of 14.7 percent, far outpacing the S&P500.
A source close to the hedge-fund company reveals that that CEO, Ray Dalio’s bullishness on the dollar drove some of the negative returns for Pure Alpha. On the other hand, Daniel Celeghin, a partner at Casey, Quirk & Associates, which advises hedge- fund managers explained that most in the hedge-fund sector was “surprised by the twists and turns of the euro crisis.”
Amid the ongoing financial turmoil in Europe and the slowdown of economic growth in emerging countries in Asia particularly China, Dalio previously expressed his confidence in the U.S. economy and the strength of the dollar. According to him, the United States is in better shape than most other countries. In June, the European Union managed to boost the economy, causing the euro to gain against the dollar, which had a negative impact on some of Bridgewater’s positions. Bridgewater Associate’s investments in commodities such as gold and oil were also down.
Dalio started Bridgewater Associates in his apartment in 1975. In July last year, he stepped down from his position as CEO and assumed the title of a “mentor” and co-CIO. He is one of the most reputable professionals in the hedge-fund industry. Investors closely monitor his views regarding the issues affecting the economy as well as his top picks in the stock market. His top five picks included in the Bridgewater Associates portfolio include: Dell Inc. (NASDAQ:DELL), Valero Energy Corporation (NYSE:VLO), Rockwell Collins, Inc. (NYSE:COL), Microsoft Corporation (NASDAQ:MSFT) and Hewlett-Packard Company (NYSE:HPQ), accoding to a 13-F. However, 13-Fs usually do not reveal most of Bridgewater’s holdings, which are many times currency positions.