“Ray Dalio experiences AUM reduction to the tune of $25 billion”
THE WEALTH TRAINING COMPANY
Ray Dalio experiences AUM reduction confirms that current market conditions are challenging, even for the king of the hedge fund world
Ray Dalio is considered to be among one of the world’s best macro investors.
There is a silver lining to Ray Dalio experiences AUM reduction, namely that the reductions in assets managed by Ray Dalio’s flagship Bridgewater fund was also entirely due to a decline in asset values rather than client withdrawals. So if stocks continue to rebound and stay in positive territory for the year then Bridgewater’s P&L will show profits.
Ray Dalio’s Bridgewater fund uses a global macro strategy, rather quantitative algorithmic trading, investing strategies. A global macro strategy bases its holdings primarily on the overall economic and political views of various countries or their macroeconomic principles. Holdings include long and short positions in various equity, fixed income, currency, commodities, and futures markets.
“Ray Dalio’s Bridgewater fund uses a global macro strategy, rather quantitative algorithmic trading, investing strategies”
THE WEALTH TRAINING COMPANY
Ray Dalio experiences AUM reduction just three months after his “cash is trash” comment in January
This was following February and March’s stock market crash, the sell-off in risk assets was triggered by a pandemic, which sent stocks down by 25% to 30% in most G20 nations, it was the largest single-month drop in living memory, then April saw a massive comeback, which resulted in the Dow’s best two week run in 82 years.
“the worst possible moment” – Ray Dalio (on his fund being hit by coronavirus)
These erratic swings in the stock market are similar to the 1929 stock market crash, which followed a similar trajectory, a massive sell-off followed by an equally impressive bear market rally, spurred on by central bank intervention.
While, all the major central banks have shown commitment to their asset purchase programs, known as quantitative easing QE, to keep risk assets from a meltdown investors need to keep mindful that in QE cannot continue indefinitely. In the worst-case scenario, what could be at stake is a loss of confidence in central banking.
The first sign of this, QE in the twilight zone, would look like a US dollar meltdown, gold would take a moonshot and the 10-year yields would spiral uncontrollably making servicing the ballooning public deficit impossible. But we are still a long way from a Fed central bank crisis, although there are signs of stress. While the USD is the most robust fiat currency it is weakening against gold. Nevertheless, demand for the perceived haven 10-year treasuries is still buoyant with yields below 1%. Faith in USD and US treasuries remains intact, despite a decade of QE, and that gives the Fed ammunition to continue creating currency to manipulate markets whichever way it wishes.
Back to the theme, Ray Dalio experiences AUM reduction, Bridgewater Pure Alpha II, the firm’s largest fund was down 20% through the first four months of this year
The fund was hit by the coronavirus at “the worst possible moment” said Ray Dalio.
Ray Dalio also assured investors that the firm would provide investors with “liquidity rather than prohibit” withdrawals.