Bridgewater was put on asset owners' watchlists in 2020 after the Pure Alpha fund experienced a 20% decline in the first quarter of 2020, said sources who noted that the improvement in the fund's returns in 2021 resulted in fewer asset owners putting the company in their penalty boxes.
Pensions & Investments reporting showed that two pension funds — the $19 billion Ohio Police & Fire Pension Fund, Columbus, and the $21.5 billion Orange County Employees Retirement System, Santa Ana, Calif. — put Bridgewater on watch in 2021 due to performance concerns.
In March, the Ohio fund placed Bridgewater on its watchlist for underperformance of an $1.1 billion investment combining Pure Alpha and S&P 500 futures, and in April, placed a $1.7 billion levered TIPS account on the list.
Bridgewater remains on the system's watchlist, but "OP&F is encouraged by what appears to be a rebound in Bridgewater's performance," said David Graham, the fund's spokesman, in an email.
Orange County placed Bridgewater on watch during an Aug. 25 meeting for long-term underperformance of its $175 million investment in the firm's Pure Alpha II fund.
"Bridgewater remains on the OCERS watchlist, but no action has been taken as we continue to evaluate the situation," said CIO Molly Murphy in an email.
The $40.4 billion defined benefit plan of the Indiana Public Retirement System, Indianapolis, is actively monitoring Bridgewater in light of the management of the firm, "but does not have a comment at this time. The INPRS investment team relies on qualitative and quantitative factors with regard to the watchlist. The evaluation is ongoing and any change will be reflected in a presentation to the board," said Dimitri Kyser, a spokesman for the system, in an email.
INPRS had a total of $4.8 billion invested with Bridgewater as of Oct. 31, according to an investment report.
"Despite its performance issues, Bridgewater remains an industry favorite," said Daniel Stern, a New York-based senior managing director at Cliffwater.
"Compared to the other macro managers, clients are comfortable investing with Bridgewater," he said.
Bridgewater reduced its client base over the past few years to focus on strategic partnerships with large asset owners, and Mr. Delaney said the group of those investors has expanded and their assets have grown.
"The capacity of our funds is primarily driven by market liquidity and conditions. The low-interest-rate environment has reduced how much we choose to manage in our alpha strategies and Pure Alpha is largely fully committed," Mr. Delaney said, noting that "market conditions have created dislocations and complexities that are creating very good trading opportunities as central banks respond to economic conditions."