Bridgewater’s Optimal Portfolio Strategy Raises $10 Billion

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The Optimal Portfolio strategy of Bridgewater Associates already raised $10 billion in less than a year, according to report from P&I based on information from a person familiar with the matter.

The Optimal Portfolio strategy started trading on February 1. The fund has $10 billion of assets under management (AUM) as of April 30 with additional clients preparing to invest, according to the source, who requested anonymity.

Ray Dalio’s co-CIO, Robert Prince introduced the Bridgewater’s new strategy to existing institutional clients in September, last year. At the time, Prince said, “We have never designed our alpha strategy to specifically relate to the beta strategy before,” but by doing so “profitable shorts on some of the long beta positions can add a measurable return.”

Optimal Portfolio targets 8.5% return

Bridgewater said the Optimal Portfolio strategy aimed to generate an 8.5% return with a volatility level of 10%. Bridgewater registered the new fund with the Securities and Exchange Commission (SEC) under exemptions Rules 506(c) of Regulation D. Under the rule, offerings of securities to sophisticated professional investors are exempted from general solicitation guidelines. The hedge fund also filed for other exemptions under the Investment Company Act Section 3(3c) and 3 (c) (7).

Bridgewater institutional clients

Some of the existing institutional clients of Bridgewater that allocated a large amount of investment to the Optimal Portfolio included the Teacher Retirement System of Texas, University of Michigan and Pennsylvania Public School Employees’ Retirement System.

During a meeting with trustees on April 30, Susan E. Oh, senior portfolio manager of Pennsylvania Public School Employees’ Retirement System said Bridgewater’s Optimal Portfolio aims to combine the best beta with tailored value-adding and risk-reducing alpha, producing a high, consistent and diversifying return of stream.

The trustees of the Pennsylvania Public School Employees’ Retirement System approved a $600 million investment in the Optimal Portfolio strategy.

The University of Michigan Endowment invested $250 million to the Optimal Portfolio in January. The Teacher Retirement System of Texas also invested $250 million in the fund in February.

The source also indicated that approximately 50% of the assets of the Optimal Portfolio strategy were new allocations from the existing clients of Bridgewater. The rest of the assets came from conversions from the hedge fund’s All Weather strategy.

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