Racing Against Time: Chinese Hedge Funds Embrace “All Weather” Strategy
As the world grapples with the uncertainty of Donald Trump’s second presidency, Chinese hedge fund managers are scrambling to launch products inspired by Bridgewater Associates’ highly successful “All Weather” strategy. This volatility-mitigating, multi-asset approach has proven to be a safe haven for investors, shielding them from the tumultuous Sino-U.S. trade war during Trump’s first term.
The Bridgewater Effect
Bridgewater founder Ray Dalio’s “All Weather” strategy has been a game-changer, boasting an impressive 37% return last year. Since Trump’s election win in November, demand for this strategy has skyrocketed, prompting Bridgewater to limit sales of its onshore funds. This has created a window of opportunity for rival hedge funds to launch their own “All Weather”-style products.
A Dozen New Entrants
At least a dozen hedge funds have launched similar strategies since Trump’s election win, with major local players like SHQX Asset Management and Shanghai Luoshu Investment Co joining the fray. Yin Zhengxin, head of marketing at Luoshu, likens the competition to the electric vehicle industry’s response to Tesla’s entry into the Chinese market.
Global Players Join the Fray
The opportunity has even attracted global hedge fund titan Man Group, which is preparing to offer mainland investors access to its AHL TargetRisk strategy. This move is based on the concept of ‘risk parity’, the same principle underlying Bridgewater’s “All Weather” approach.
The “All Weather” Advantage
Designed by Dalio in 1996, “All Weather” diversifies investments across assets, balancing risks to perform well in any economic condition. Bridgewater China’s “All Weather” product, launched in 2018, has proven resilient during the Sino-U.S. trade war, the COVID-19 pandemic, and even the “quant quake” that affected many Chinese hedge funds.
Flight to Safety
“When future uncertainty spikes, people would have concerns putting money into single-risk assets,” said Lv Chengtao, president of SHQX Asset. The company’s newly launched “All Weather” products drew significant inflows in the second half of last year, reflecting the popularity of the strategy.
A Wave of New Launches
Other Chinese hedge fund managers that have rolled out similar products include Jroyal Asset, Rongsheng Fund, and Shanghai Lanyin Capital Management Co. Carlos Casanova, Asia senior economist at UBP, notes that there has been a huge flight to safety among Chinese investors, driven by concerns about Trump’s presidency.
As the demand for “All Weather” strategies continues to grow, it remains to be seen whether local fund managers can excel and potentially undercut Bridgewater’s dominance in the next 3-5 years. One thing is certain – the race is on to provide investors with a safe haven in uncertain times.
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