Bridgewater, the Largest Foreign Private Equity Fund, Changes Fund Manager; Why Does Its All-Weather Strategy Excel in China? (AI Translation)
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文｜财新 王力为
By Caixin's Wang Liwei
【金融我闻/王力为】桥水中国的“拳头”私募产品，桥水全天候增强型私募基金将于9月初变更基金经理。
【Finance News/Wang Liwei】 The flagship private equity product of Bridgewater China, the Bridgewater All Weather Enhanced Private Fund, will undergo a change in fund manager in early September.
尽管中国正处于投资收益率下行通道，但桥水的这一明星产品回报出色。作为私募基金，桥水中国的产品不能公开披露业绩，只能针对持有人或者有意向的投资人进行不同层级的信息披露。多位持有人表示，该产品近一年收益率达两位数（超过10%），远高于同期沪深300（-15%）和中债综合（6.5%）的收益率；近三年均录得正回报，2022年7%，2023年10%，过去五年的年化回报率为15%。据持有人介绍，“桥水的全天候策略表现好，原因在于桥水并不追求超额回报、不做信用下沉，收益主要来自资产轮动和制衡，主要是对风险的监控非常到位。”
Despite China's investment yields trending downward, Bridgewater's star product has delivered impressive returns. As a private equity fund, Bridgewater China's product performance cannot be publicly disclosed and is shared only with holders or interested investors through various levels of disclosure. Multiple holders indicate that the product's one-year return is in the double digits (over 10%), significantly outperforming the Shanghai-Shenzhen 300 Index (-15%) and the ChinaBond Composite Index (6.5%) over the same period. Over the past three years, it has consistently generated positive returns, with 7% in 2022, 10% in 2023, and an annualized return of 15% over the past five years. According to a holder, "Bridgewater's All-Weather Strategy excels because it doesn't pursue excessive returns or lower credit standards. The earnings mostly come from asset rotation and balancing, primarily due to excellent risk management."
相形之下，桥水基金面向全球客户的产品过去几年的回报并不算亮眼，在全球最赚钱对冲基金榜单上，2022年桥水被城堡投资超越，2023年还罕见录得负回报。
In contrast, Bridgewater Associates' products for global clients have not delivered standout returns in recent years. On the list of the world's most profitable hedge funds, Bridgewater was surpassed by Citadel in 2022, and even recorded rare negative returns in 2023.
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- Bridgewater China's flagship fund, the All Weather Enhanced Private Fund, significantly outperformed benchmarks with a double-digit one-year return compared to the Shanghai-Shenzhen 300 and ChinaBond Composite Index.
- Sun Yue, the fund's first manager, was promoted to the U.S. headquarters; Zhang Duan now leads the fund reflecting the firm’s systematic investment approach.
- Bridgewater Associates faced underperformance globally, lagging behind top hedge funds; however, its Pure Alpha II fund posted a 14.3% gain in the first half of 2024.
Bridgewater China's flagship private equity product, the Bridgewater All Weather Enhanced Private Fund, is set to undergo a change in fund manager in early September. Despite declining investment yields in China, this fund has consistently delivered impressive returns, significantly outperforming major indices. Over the past year, it achieved double-digit returns, outstripping the Shanghai-Shenzhen 300 Index and the ChinaBond Composite Index. Over a five-year period, it has managed an annualized return of 15%. The success of this fund can be attributed to its robust risk management and strategic asset rotation rather than pursuing excessive returns or lowering credit standards [para. 1].
However, Bridgewater Associates’ global products have not performed as well in recent years. By the end of 2023, Bridgewater Associates managed $112.5 billion in client assets, while Bridgewater China's assets surpassed RMB 40 billion, a fourfold increase from two years earlier. The change in fund management within Bridgewater China is due to Sun Yue’s promotion to the U.S. headquarters. Zhang Duan has taken over as the new fund manager. Bridgewater emphasizes its systematic investment approach, suggesting the firm’s resilience does not depend on a single fund manager [para. 1][para. 2][para. 3].
Sun Yue, the first fund manager of Bridgewater China and a native of Beijing, returned to Bridgewater in 2018 to lead its Chinese operations. under her leadership, Bridgewater China’s assets grew significantly, nearly doubling in a year and reinforcing its leading position among foreign hedge funds in China. The company's executive team is notably composed entirely of women. Key figures include Vice Presidents Jacqueline Ho and Yin Chen, and Compliance and Risk Control Head Jin Jing. Zhang Duan, the new fund manager, previously served at Cambridge Associates and joined Bridgewater in 2015 [para. 1][para. 2][para. 3].
Amendments to the fund contract have also been made to comply with the "Private Securities Investment Fund Operational Guidelines" effective from August 1. These changes introduce new restrictions on investment proportions, aiming to align with regulatory standards. Bridgewater China is offering current clients the option to redeem investments without fees before the new guidelines take effect [para. 3].
Bridgewater China’s strong performance is attributed to its All-Weather strategy, which diversifies investments across various asset classes. The firm has reported remarkable returns through investments in gold ETFs. The All-Weather portfolio strategy, favoring bonds over stocks, has proved effective amid a struggling equity market and a rising bond market in China. For the second quarter of 2024, Bridgewater added short-term bonds, due to the positive policy environment, and increased equity allocations due to attractive valuations. The firm's valuation of stocks, bonds, and commodities reflects an adaptive strategy to current market conditions [para. 2][para. 3][para. 4].
Meanwhile, Bridgewater Associates has focused on global restructuring to replenish its past stellar returns. In recent years, its Pure Alpha fund has posted inconsistent returns, leading some clients to consider exiting the fund if performance does not improve. However, in the first half of 2024, the Pure Alpha II fund recorded a return of 14.3%, signaling a recovery [para. 2][para. 3].
Bridgewater's All-Weather strategy originally performed exceptionally during crises like the 2008 financial crisis, but risk parity strategies have since seen a decline in asset management. The firm’s All Weather Fund lost 22% in 2022 but rebounded with double-digit returns in 2023. Bridgewater is continuously adjusting its approach, incorporating AI and machine learning to respond quickly to market changes and maintain its foundational "timeless and universal" investment principles. This includes potential reductions in the Pure Alpha fund size, allowing returns to remaining investors. The firm's recent expansion includes a new office in Singapore to strengthen its presence in Asia [para. 3][para. 4].
Overall, Bridgewater China has managed to deliver impressive returns despite regulatory challenges and a tough market environment, ensuring its leading stature in China’s financial market [para. 1][para. 2][para. 3][para. 4].
- Bridgewater Associates
- Bridgewater Associates, led by CEO Nir Bar Dea and founded by Ray Dalio, manages $1,125 billion globally with $56 billion managed through its China subsidiary, Bridgewater China. Known for its All Weather strategy, the firm also manages flagship funds like Pure Alpha. The China subsidiary, under executive leaders including Sun Yue, has seen rapid growth and outperformed domestic benchmarks.
- Citadel Investment
- In 2022, Citadel Investment, founded by Ken Griffin, recorded the largest annual profit for a hedge fund in history with a $16 billion investment net income, surpassing Bridgewater Associates. Citadel's flagship Wellington Fund had an 8.1% return in the first half of 2024. Citadel routinely returns a portion of its profits to investors, amounting to around $20 billion over six years. As of July 1, 2024, Citadel managed assets worth $63 billion.
- Huaan Gold Easy ETF
- The article mentions Huaan Gold Easy ETF (华安黄金易ETF) as one of the top holdings in several private products by Bridgewater China, such as the All-Weather Enhanced China Private Fund Nos. 1, 2, and 3. Investment in gold ETFs, including Huaan Gold Easy ETF, contributed significantly to Bridgewater's overall performance in 2023, generating double-digit returns.
- E Fund Gold ETF
- The article mentions that the Bridgewater All-Weather Enhanced China Private Fund appears in the top ten holders of multiple gold ETFs, including E Fund Gold ETF. Bridgewater’s investment in gold ETFs has shown two-digit returns in 2023, significantly contributing to the overall performance of their funds.
- Bosera Gold ETF
- According to the article, Bosera Gold ETF is one of the funds in which Bridgewater's private products are major investors. The Bridgewater All-Weather Enhanced Chinese Private Fund includes Bosera Gold ETF among its top holdings. Invested significantly in 2023, these gold ETFs delivered double-digit returns, contributing notably to Bridgewater's overall performance.
- Two Sigma Investments
- Two Sigma Investments is another foreign private equity firm in China, known for strong performance. Its recent annual return approached double digits, although its six-month performance trailed the CSI 300 Index. Two Sigma engages in middle to low-frequency trading. CEO Lin Guofeng stated the firm is actively expanding its onshore business despite regulatory scrutiny against high-frequency trading, emphasizing a nuanced understanding of market stability concerns.
- Millennium Management
- Millennium Management, also known as the Millennium Fund, achieved a return rate of 6.9% in the first half of 2024. Managed by Izzy Englander, it has consistently delivered strong performance and is notable for being one of the leading hedge funds globally. The fund's management strategy focuses on risk management and diversified trading.
- 1996：
- Sun Yue enrolled in the University of Chicago.
- 2005：
- Sun Yue joined Bridgewater Associates.
- 2011 - March 2024：
- A backtest reveals the All Weather portfolio established in Bridgewater's Beijing office achieved a cumulative return of 100.4%.
- 2018：
- Bridgewater China officially completed its registration with the Asset Management Association of China and began operations in Shanghai.
- August 2018：
- Sun Yue rejoined Bridgewater and was appointed as the manager of Bridgewater China Fund.
- October 2018：
- Bridgewater China launched its first private equity product.
- 2022：
- Bridgewater opened its Singapore office.
- 2022：
- Bridgewater was surpassed by Citadel as the world's most profitable hedge fund and recorded rare negative returns.
- 2022：
- Bridgewater Associates recorded positive returns and ranked second globally by investment net income, despite significant declines in global stock and bond markets.
- First three quarters of 2022：
- Bridgewater's Pure Alpha II fund initially achieved nearly 35% gains.
- First three quarters of 2022：
- The smaller and less leveraged Pure Alpha fund initially poised to exceed a 27% annual gain.
- August 2022：
- Sun Yue succeeded Wang Yan as the legal representative and general manager of Bridgewater China.
- End of 2022：
- Bridgewater's All Weather Fund lost 22%.
- December 2022：
- Sun Yue commented on the positive returns of bonds and commodities despite poor stock performance in the domestic Chinese market amid high market volatility due to the COVID-19 pandemic.
- 2023：
- Bridgewater's All Weather Fund achieved double-digit returns.
- 2023：
- Bridgewater Associates recorded a return of -2.6% and fell to the fourth position on the annual list of the most profitable global hedge funds.
- By the end of 2023：
- Bridgewater Associates managed $112.5 billion in client assets, and its wholly-owned subsidiary, Bridgewater China, managed over RMB 40 billion.
- Earlier this year (2024)：
- Sun Yue was promoted to a position at Bridgewater's U.S. headquarters, prompting the change in the fund manager.
- January 2024：
- Bridgewater China completed a new round of 2 billion yuan fundraising, raising its assets under management to approximately 40 billion yuan.
- First half of 2024：
- Bridgewater's Pure Alpha II fund posted a return of 14.3%.
- March 21, 2024：
- Last update of Bridgewater China's executive information registered with the Asset Management Association of China.
- July 1, 2024：
- Bridgewater manages $108 billion in assets.
- August 1, 2024：
- New 'Private Securities Investment Fund Operational Guidelines' come into effect in China.
- Mid-August 2024：
- Bridgewater China offers clients the option to submit redemption requests free from the constraints of the product's lock-up period and without incurring redemption fees.
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