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Bridgewater Associates - Alpha Edge Recognition

Institutional Investor • 8 February 2024

Alpha Edge Recognition: Outstanding LP-GP Partnerships

Allocator Intel is recognizing leaders in the allocator community, acknowledged by their peers, for exceptional leadership in the key areas of portfolio construction in the Alpha Edge Recognition Awards.
Bridgewater Associates, represented at the Awards by Melody Rollins, Global Head of Core Institutional Clients, is nominated for its leadership in transforming the industry from within. Bridgewater’s culture, grounded in transparency and meritocracy, helps to uniquely fuel the firm’s research and insights, in addition to their performance for clients.
The $123.5 billion hedge fund manager, based in Westport, Connecticut, has also been at the cutting edge of emerging areas including artificial intelligence and machine learning (AI and ML) over the years, working to lead on the impact that new technologies can have on investing and the finance space more generally. Bridgewater’s co-Chief Investment Officers, Bob Prince and Greg Jensen, and senior investors have worked together for decades, with an average tenure of 19 years.

Can you share an overview of what your portfolio looks like today?

Bridgewater’s mission is to build a better understanding of the world to help deliver for our clients. Our firm revolves around that mission, and our portfolio puts delivering for our clients first and foremost. Our culture is centered on the pursuit of fundamental truths through open and honest debate and continuous improvement, along with a differentiated approach of systemizing a decades-long effort of compounding data and understanding that helps position us to perform.
Some of the most significant opportunities we see today, across markets, continue to come from being short on financial assets and trading country differentials. Although that’s been the case throughout much of this year, the exact composition of the portfolio has shifted as conditions and pricing have evolved.
To give you a rundown of a few areas of importance:
Compared to earlier in the year, we now see larger bearish pressures aligning across many developed bond markets. Yields in the U.S., UK, and Europe look too low, given the degree of economic resilience we’ve seen so far, and they don’t offer much protection should inflation settle in above central bank targets.
In equities, we’re short in aggregate, but the opportunities we see now vary substantially by country. In the U.S., stocks are vulnerable to both weaker cash flows or sustained high cash rates, given high valuations, optimistic earnings expectations priced in, and the reliance on liquidity-sensitive flows. By contrast, Japanese equity valuations are attractive, domestic conditions are favorable, and investors remain under-allocated.
Within commodities, we’ve pared back our short positions compared to earlier in the year. We’re neutral oil, with modest bearish positions in precious metals and industrial metals. Within credit, we’ve built a modest short position in US corporate credit and remain short on sovereign credit spreads in select European economies.
Our trading of currencies also reflects many of the divergences we see across regions. We’re modestly bearish on the U.S. dollar relative to developed currencies and are very bullish the euro. This year, we’ve also gotten bearish on the Canadian and Australian dollars relative to other developed currencies. Within emerging currencies, we are roughly neutral in aggregate relative to developed currencies.*

What have been the most significant changes over the last few years?

Our largest change has been the completion of our transition from a founder-led firm to a lasting institution. This transition had been in the works for many years, and we had a number of milestones since in mid-2020, Bridgewater transitioned the investment governance to an investment committee; in December 2021, we established our Operating Board of Directors, and in October 2022, the transition from our Founder was completed.
Beyond the transition, Bridgewater has also undergone notable leadership changes including Nir Bar Dea serving as Chief Executive Officer, and more recently, Karen Karniol-Tambour becoming the third Co-Chief Investment Officer in February of 2023, after 16 years at the firm. Karen joined as an Investment Associate on the fixed income team and, just seven years later, became Head of Investment Research. She also became a trusted advisor to our clients, partnering with them to translate our understanding into their portfolios. In 2021, Karen became Co-CIO for Sustainability, launching with Carsten Stendevad our first portfolios that incorporate sustainability considerations alongside risk and return. Karen has also held key leadership roles on our Investment and Commercial Committees and has played a significant role mentoring the next generation of investors and enriching our community.
Following the completed transition and period of good performance, Bridgewater announced in March that we would be undergoing a restructuring to position the firm to drive innovation and create new important solutions for clients (such as AI and ML).

What investment opportunities are you focusing on, over the next 12 to 18 months?

Our alpha opportunity set consists of roughly 200 markets across the major global asset classes, including: nominal government bonds, inflation-linked government bonds, currencies, equities, commodities, corporate credit spreads, and sovereign credit spreads. Our process is to generate views across these markets based on a bottom-up assessment of the timeless and universal drivers in each market we trade. Ultimately, we aim to build the best portfolios out of our views in markets, in line with the objectives and characteristics of our strategies.
We’re also looking to new areas that we are deepening our solutions on such as sustainability, long-only equities, and AI and ML.

What challenges do you anticipate for your team over the next few years?

Regardless of what year it is for Bridgewater, we always face the challenge of how we can best deploy and operationalize the insights and understandings that we have developed over nearly 50 years to perform for our clients. As an institution, we face that challenge daily and overcoming it has been a determining factor in our long-term success.

What do you like to spend your spare time doing?

Our community is incredibly important to us, and we believe that it reinforces the meaningful work that we do each day. In addition to our company-wide events and celebrations, we are home to over 100 common interest groups where people have many options for getting involved in the community, ranging from diversity initiatives to book clubs to sports teams.


* Data is shown as of June 30, 2023. The views expressed are based on Bridgewater analysis of and expectations for the relevant markets, do not constitute a personal recommendation, and are for informational and educational purposes only. Bridgewater’s actual positions and trading may, and often will, vary from representations shown based on any number of factors, such as client investment restrictions, portfolio rebalancing and transaction costs, risk controls, and liquidity constraints, among others. Exposures not shown may have material impacts on the performance of the account. Bridgewater has no obligation to provide recipients hereof with updates or changes to such data.
Please see Bridgewater’s important disclosures and other information. Information contained herein is sonly current as of the publish date and is intended only to provide the observations and views of
Bridgewater Associates, LP (“Bridgewater”) as of the date of publication unless otherwise indicated. The
views expressed herein are solely those of Bridgewater and are subject to change without notice. Every
investment involves risk and in volatile or uncertain market conditions, significant variations in the value or return on that investment may occur, including the risk of a complete loss of an investor’s entire
investment. Past performance is not a guide to future performance.

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