Explainer: How Hedge Fund Bridgewater delivers strong returns in China
Despite an increasingly complicated market situation, Bridgewater Associates, the world's largest hedge fund, delivered exceptional performance in China last year, highlighting the profit potential of the Chinese market.
STRONG PERFORMANCE IN CHINA
According to the Financial Times, Bridgewater China Investment Management (BCIM), the local arm of Bridgewater Associates' performance surpassed many local and other foreign funds and is set to grow to about 40 billion yuan (5.6 billion U.S. dollars) at the end of 2023.
As one of the world's largest hedge funds, Bridgewater Associates managed assets worth 168 billion U.S. dollars at its peak, wielding extensive influence globally.
Public records show that BCIM, founded in 2016, began issuing investment products in 2018. It issued a record 56 investment products last year, up from 30 in 2022. This showcases BCIM's rapid expansion and commitment to diversifying its portfolio in the investment market.
The firm's flagship product, the "All Weather Strategy China Private Investment Fund," yielded 10.2 percent last year, according to a fund distributor.
Public records show multiple Shanghai- and Shenzhen-listed gold ETFs listed "Bridgewater All Weather Strategy China Private Investment Fund" as one of the top 10 investors in the first half of 2023.
KEYS TO SUCCESS
Analysts believe BCIM's outstanding performance is primarily due to its risk-balanced "All Weather" strategy and full experience gained from long-term research into the Chinese market.
These allowed Bridgewater to make relatively favorable judgments and decisions amidst the complexities of investing in China.
Since its founder Ray Dalio first visited China in 1984, Bridgewater Associates has been involved in the Chinese market for nearly 40 years. As a long-time Chinese enthusiast and investor, Dalio has a profound interest in and a deep understanding of the Chinese market.
In a conversation with Zhu Min, former deputy managing director of IMF, Dalio said that diversification is key to investing.
"We have an offshore fund in the Chinese market. It has performed very well, with an annualized return of 15 percent over the past three years. It is mainly because we made timely adjustments. Diversifying the asset allocation and creating a good investment portfolio is vital."
Dalio said that when investing solely in China, one needs to achieve diversification within the Chinese market; if engaging in international investments, a diversified portfolio should be created globally.
BCIM executive said in a roadshow that the fund's commodities investment, led by gold ETFs that generated double-digit returns last year against a slump in the equity market, was the biggest contributor to its overall performance.
According to Reuters, Bridgewater's "All Weather Strategy" has a very low correlation with the Chinese stock market, which has been on a downward trend in recent years. A rebound in the Chinese bond market largely drove its significant return in 2023.