Bridgewater fails to recoup losses from low bond yields

The Pure Alpha fund at Ray Dalio’s $160bn hedge fund group lost 2.3 per cent in the nine months to September, after a particularly difficult August when the firm was wrongfooted by the decline in global interest rates.

The performance of Mr Dalio’s fund stood in sharp contrast to that of the broadest global bond market gauge, which was up 6.4 per cent over the same period.

Investors flocked to the relative safety of government bonds in August, as trade tensions between the world’s two largest superpowers ratcheted higher and central banks turned dovish in the face of souring global growth prospects. The rush to the world’s safest markets sent bond yields, which move inversely to price, tumbling to their lowest level in years.

At one point, the yield on Germany’s entire government bond market plunged below zero, while the benchmark 10-year US Treasury bond saw its yield fall below 1.5 per cent — a threshold it had not breached in three years.

Pure Alpha went some way to paring back its losses in September when it rose by 3.8 per cent, as investors swapped lower-yielding government bonds for riskier assets. But performance is on the decline again this month with the flagship fund down about half a per cent in October, bringing its year-to-date losses to 2.74 per cent.

This year sits in contrast to 2018 when Pure Alpha delivered 14.6 per cent net of fees even as volatility returned to the markets. Caught out by the market rebound at the start of the year, Pure Alpha delivered one of its worst first halves in two decades as it posted a 4.9 per cent loss in the six months to June.

The $16bn Pure Alpha Major Markets fund, which offers investors access to large markets such as European bonds, fared worse. The fund lost 8 per cent over the past three quarters and has declined by 0.4 per cent in October.

Bridgewater’s passively managed All-Weather fund, which is largely immune from macroeconomic shifts, was up 13.6 per cent in the nine months to September.

Mr Dalio has condemned the ultra-low interest rate environment and said central banks are losing the power to help the economy out of a recession. At the IMF annual meetings on Thursday, the billionaire investor said the global economy is in a “big sag”.

Source: FT

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