In both 2010 and 2011, Bridgewater was ranked the largest and best-performing hedge fund in the world. Therefore when they make bullish bets on stocks, commodities, oil & gold miners, investors should take notice.
Bridgewater Associates was founded in 1973 by Ray Dalio who now serves as the fund’s co-chief investment officer alongside Bob Prince. The fund manages approximately $130 billion in global investments for a wide array of institutional clients, including foreign governments, central banks, corporate and public pension funds, university endowments and charitable foundations.
Dalio and Prince believe that during 2013 reduced systemic risk, coupled with a better economic outlook, will cause investors to move out of cash and bonds, and into riskier assets.
At the recent World Economic Forum in Davos Dalio commented that, “There is too much liquidity and so bonds are a poor investment, they will have a poor return. Cash will have an even worse return, that’s assured.”
Although the pair are bearish on cash and bonds, they are bullish on global stocks and hard assets such as commodities, oil & gold.
Bridgewater’s latest 13F filing reveals that in the fourth quarter of 2012 the fund’s top three stockholdings were:
- The Vanguard MSCI Emerging Markets ETF (NYSEARCA:VWO) – a 30.5% stake.
- The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) – a 29.4% stake.
- The iShares MSCI Emerging Markets Index ETF (NYSEARCA:EEM) – a 25.6% stake.
During the quarter, the fund took new positions in Intel Corporation (NASDAQ:INTC), and significantly increased its stake in Broadcom Corporation (NASDAQ:BRCM), Qualcomm, Inc. (NASDAQ:QCOM) and Nvidia Corporation (NASDAQ:NVDA).
In addition to buying chipmakers, Bridgewater increased its holding of The Chubb Corporation (NYSE:CB), The AES Corporation (NYSE:AES), Apollo Group Inc (NASDAQ:APOL), American Eagle Outfitters (NYSE:AEO), and Bank of America Corp (NYSE:BAC). It also more than doubled its interest in the iShares MSCI Brazil Index Fund (NYSE: EWZ), which is the largest ETF tracking Latin America’s largest economy.
The fund also ramped up its holdings of precious metals miners, including Barrick Gold Corporation (NYSE:ABX), Agnico-Eagle Mines Limited (NYSE:AEM), Yamana Gold, Inc (NYSE:AUY), Goldcorp Inc. (NYSE:GG), Kinross Gold Corporation (NYSE:KGC), Eldorado Gold Corp (NYSE:EGO), Silver Wheaton Corp. (NYSE:SLW) and Pan American Silver Corp. (NASDAQ:PAAS). In total Bridgewater now has more than $35 million invested in mining stocks.
Dalio and Prince are also bullish on oil and on a recent client conference call Prince talked about some of the positive fundamentals for oil. “If you get better growth in the US, better growth in China, inventories coming down some, and then the incremental supply coming down some – we’re seeing some shifts in the supply-demand balance in oil… a bullish shift there for oil.”
As well as investing in ETFs that track the price of oil, investors could also look at investing in the oil service companies via the Market Vectors Oil Services ETF (NYSEARCA:OIH).
He also sees a better outlook in terms of global growth. “The point is not so much that we’re going to be in the gangbuster period of growth, it’s more that growth is likely to be better, particularly in the United States, than it has been. It’s more of a movement of capital. The money moving out the risk curve and into risk assets won’t take much growth to trigger that kind of shift.”
As a result of this shift the fund is “long equities around the world” and is also “shifting to long commodities positions”.
Prince also said that Bridgewater is shorting the Japanese yen, though he is bullish in on other currencies including the Korean won, Mexican peso, and Russian ruble.
“We’re now short the yen, largely related to the change in their balance of payment circumstances and, subsequent to that, the emphasis on a more aggressive monetary policy,”
Bridgewater is also wagering on European bonds while betting against those in the US, Japan, the UK and Australia.
The Bridgewater funds have proven themselves over time and therefore investors should take notice of their strategy. Since inception in 1991 Bridgewater’s Pure Alpha fund has posted an annual return of 14%. Meanwhile their All Weather fund has posted a 9.4% annual return since inception in 1996.