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Bridgewater Associates Explains The Secret To Its Success

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In the thirty-five years since its founding, Ray Dalio's Bridgewater Associates has done quite well for itself, posting the sort of returns clients appreciate. To that end, the firm's Pure Alpha Strategy was up 31% for the year through August and, according to a Bridgewater spokeswoman, has “outperformed the market over the last three years by more than 70 percent."

How do they do it? Are they role-playing hyena and wildebeest again? Is the market the wildebeest in this scenario? As B-Water's ability to make it rain does not appear to be covered in the firm's handbook, co-chief investment officer helpfully broke it down today.

The short version: "Either we are of average intelligence and everyone else in the industry is an idiot or we are fucking geniuses and make people of marginally respectable intelligence (you) look like morons. Take your pick."

The long version:

Prince has an apparently simple explanation [for Pure Alpha's success]. He said: “We try to have a better understanding than anyone else on the planet of the way fundamental economic conditions affect a market and vice versa.” He conceded that some might find this difficult to believe, but he said: “It’s not unlikely that we would know more about a lot of things than anyone else.”

Also, FYI, Bridgewater says it isn't a hedge fund.

Prince, told Financial News: “We don’t think we are a hedge fund.”

Instead, the Connecticut firm with 900 employees, which said it was running $88bn, prefers to say it is “unshackled by conventions”. It runs money for its clients, all of whom are institutional investors, using computer-driven trading strategies dealing in fixed income, currencies, equities and commodities.

They'd get into it further but it'd probably be too difficult for you to understand. Best to leave it at that.

Bridgewater: The Hedge Fund That Thinks It Isn't [eF via BI]