Bridgewater Defends Risk Parity Strategy That It Developed & Nurtured

As Bridgewater Associates flagship $80 billion “All Weather Fund” strategy found difficulty in August, falling by 4.2 percent, while the macro fund was reported down 6.9 percent on the month, a document from the hedge fund explaining their approach to risk parity and how long term exposure to risk, not short term market cycles, is a key consideration at this moment in time.

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With the S&P 500 index down 6.3 percent in August, many investors struggled to various degrees. Hedge fund managers such as David Einhorn, down 5.3 percent in August, and Lee Cooperman, down from 9 to 11 percent in his various funds, all found significant difficulty. What has surprised some is the degree to which normally noncorrelated fund managers,...