Bridgewater Associates LP, which narrowed its investment lineup four years ago to just an alpha-generating hedge fund and a risk-parity beta strategy, is poised to launch a more liquid version of the hedge fund.
But potential Bridgewater investors looking for alpha are out of luck: The new strategy — Pure Alpha Major Markets — like the original Pure Alpha hedge fund strategy, will be available only to existing clients. Pure Alpha has been mostly closed to new investors since 2006.
The Pure Alpha strategy has been so successful that the Westport, Conn.-based manager is returning money to its institutional clients in order to keep the strategy within its strictly enforced capacity limit.
By contrast, the firm's beta strategy, All Weather, with $23 billion under management as of Aug. 1, still is open to new investors.
Bridgewater doesn't disclose the size limit on the Pure Alpha approach, Robert Prince, co-chief investment officer, wrote in an e-mail response to questions. But Pure Alpha's growth this year has been extremely strong. Assets managed in the strategy swelled by $14 billion or 32% since Dec. 31 to $58 billion as of Aug. 1. Half of that growth came in July: Pure Alpha's assets totaled $51 billion as of June 30, according to data from eVestment Alliance LLC, Marietta, Ga.
A recent e-mail to clients said the new strategy will invest in “markets that are not capacity constrained.”
“As we plan to return profits from our Pure Alpha strategy, due to being above our conservative capacity targets, Pure Alpha Major Markets is a potential option for clients wishing to reinvest returned assets with Bridgewater,” the client e-mail said.
“Because we are not looking to raise assets and we are otherwise closed to new business ... this is a good way to create a limited accommodation to existing clients whose PA (Pure Alpha) assets have risen as a result of good performance (e.g. we are up about 20% this year),” Mr. Prince said in his e-mail.
Client demand was not behind Bridgewater's decision to carve out the more liquid strategies from Pure Alpha into a stand-alone investment strategy, Mr. Prince added.
According to data from eVestment Alliance, Pure Alpha returned 13.93% in the first six months of 2010 and 22.74% for the year ended June 30, significantly outperforming the HFRI Hedge Fund Weighted Composite index's -0.21% return for the six-month period and 9.17% for the 12-month period.