Bridgewater’s Pure Alpha Strategy fund, benefiting from what billionaire founder Ray Dalio described as a “Goldilocks period” for the stock market, crushed the competitors final yr with a 14.6% achieve.
That’s a interval by which the S&P 500
misplaced four.four%, and the typical hedge fund misplaced 6.7%. Winners had been, certainly, a rarity.
Dalio didn’t get into the small print of his outperformance, however he did share this “one important thought” in a LinkedIn post on Monday:
‘If you are worried when the stock market goes down and happy when it goes up, it probably indicates that your portfolio is unbalanced. If your income is also tied to how the economy does, you are doubly at risk because your portfolio can go down when your income is worst, which is scary.’
He defined that most individuals and corporations discover themselves in that unenviable place and sometimes flip up the danger by borrowing an increasing number of cash, which solely exacerbates the issue.
“That’s what makes the financial rollercoaster ups and downs so big and dramatic,” Dalio stated. “To me, the key is to not have any systematic biases by structuring your portfolios and your incomes so that they hedge each other and are in balance. Achieving good balance is the most important thing.”
Westport, Conn.-based Bridgewater — with $160 billion in belongings — reigns because the world’s largest hedge fund. The Pure Alpha fund has been a gradual outperformer, having returned double digits, on common, over its 28-year historical past.