Asset Management CultureMarch 17, 2020

Flagship Bridgewater Fund Reportedly Tumbles 20% From Coronavirus

Founder Ray Dalio has admitted being taken by surprise by the economic impact.

Reported by Sarah Min

The flagship fund of Bridgewater Associates reportedly fell 20% this year, as founder Ray Dalio backtracked on his early stance that the coronavirus would have a minimal impact on markets.

The hedge fund’s Pure Alpha Fund II dropped roughly 13% through Thursday, as reported by the Financial Times, citing people familiar with the matter. The portfolio allegedly dropped 8% already in the first two months of 2020.

“We did not know how to navigate the virus and chose not to because we didn’t think we had an edge in trading it. So, we stayed in our positions and in retrospect we should have cut all risk,” Dalio said in a statement to the Financial Times.

“We’re disappointed because we should have made money rather than lost money in this move the way we did in 2008.”

A spokesperson for Bridgewater Associates declined to comment on the report.

It’s a misstep for the macro strategy portfolio, which won recognition for generating returns during the financial crisis. And the Pure Alpha fund presumably fell even further this week after another drop on Monday across all three major US stock indexes, slides that triggered yet another circuit breaker. The reason this time? The Federal Reserve’s action to cut interest rates over the weekend failed to mollify investors. To date, the S&P 500 has fallen 23% for the year.

Investors are concerned that the actions—which include buying up billions of dollars in government debt—were both premature and unhelpful, leaving the federal government little room to provide stimulus if the economic situation gets any worse.

In a LinkedIn post on Monday, Dalio wrote that he was “surprised” that the COVID-19 disease was the impetus to cause a downturn, which he considers worrisome now that the Fed has cut interest rates to near zero.

“While it is an extremely serious infectious disease that will produce many harmful economic impacts, these things alone don’t scare me; however, when combined with long-term interest rates hitting the 0% floor, it really worries me,” Dalio wrote.