Exclusive-Bridgewater raises new fund strategy less dependent on equities

By Carolina Mandl

NEW YORK (Reuters) – Bridgewater Associates has raised at least $800 million in recent months for a new fund strategy, regulatory filings show, an additional offering that comes as the hedge fund manager revamps business after founder Ray Dalio gave up control.

Connecticut-based Bridgewater, which manages $145 billion, launched the “Defensive Alpha” strategy in July last year, regulatory filings showed. A source close to Bridgewater said the strategy, which has not been reported previously, is designed to help weather equity bear markets and generate returns negatively correlated to equities, which means the fund’s profits will increase if stocks fall.

Two fund vehicles under that strategy’s name had raised $836.4 million from investors since their launches in July, regulatory filings at the end of October show, according to Convergence Inc, a provider of alternative funds data which analyzed Bridgewater’s filings per a Reuters request.

Bridgewater declined to comment on the $836.4 million raised.

Initially, Bridgewater invited a small set of clients, including seed investors who provide money for new launches, and has now been offering its strategy to more investors, one source familiar with the matter said. There are 10 investors so far, the filings show, according to Convergence.  

    The new strategy is an addition to other offerings from the 48-year-old hedge fund, best known for its All Weather and Pure Alpha funds. Bridgewater’s most recent launch had been a sustainability focused fund in 2021.

Investors have been trying to navigate an uncertain market and economic outlook after central banks suddenly shifted from accommodative monetary policy to aggressive interest rate hikes to fight inflation. The S&P 500 tumbled 19.4% in 2022, while the tech-heavy Nasdaq plummeted 33.1%, the biggest annual percentage decline for both indexes since 2008.

In that market last year, Bridgewater’s flagship fund, Pure Alpha gained roughly 9.5% and outperformed global equities indexes. But that came after a much stronger start to the year, and its returns lagged rival macro funds. Pure Alpha actively bets on the direction of various types of securities — including stocks, bonds, commodities and currencies — by predicting macroeconomic trends.

The new strategy underscores how Bridgewater is quickly changing under a new generation of investors after Dalio, its founder, gave up control last year. On Wednesday, Chief Executive Nir Bar Dea announced a major overhaul at the hedge fund, including restricting investments in Pure Alpha and plans to launch new products.

A strategy like Defensive Alpha could appeal to pension funds, which have portfolios already loaded with bets on stocks and have not found in hedge funds the best protection against equity market downturns, according to one hedge fund investor who declined to be named.

(Reporting by Carolina Mandl, in New York; editing by Megan Davies and David Gregorio)