Bridgewater Associates LLP has pulled off a feat few other money managers have done: Its newest strategy attracted $10 billion from existing institutional clients in less than a year.
Some Bridgewater clients — including Teacher Retirement System of Texas, University of Michigan and Pennsylvania Public School Employees' Retirement System — have written large-ticket allocations to the Optimal Portfolio, the Westport, Conn.-based firm's first new investment strategy since 1996.
Robert Prince, Bridgewater's co-chief investment officer, introduced the firm's new alpha-meets-beta strategy during a client conference call last September.
Bridgewater researchers found that integrating the company's iconic Pure Alpha strategy with its equally well-known All-Weather risk-parity beta approach and adding alpha short and market-neutral positions created a portfolio expected to produce a net annualized return of 8.5% with a 10% risk level.
Bridgewater officials declined to be interviewed, citing SEC restrictions on soliciting business for a private investment fund.
The Optimal Portfolio is only being offered to Bridgewater clients.
The Optimal Portfolio “aims to combine (Bridgewater's) best beta with tailored, value-adding and risk-reducing alpha, producing a high, consistent and diversifying return stream,” said Susan E. Oh, senior portfolio manager at the $52 billion Pennsylvania Public School Employees' Retirement System, Harrisburg, in a report presented to trustees at an April 30 meeting.
Trustees approved a $600 million investment in Bridgewater's new strategy at that meeting.
Investment staff of the $10 billion endowment of the University of Michigan, Ann Arbor, invested $250 million in the Optimal Portfolio in January. Kevin P. Hegarty, executive vice president and chief financial officer, in a report presented at a May 21 meeting of the university's Board of Regents, cited the combination of Bridgewater's Pure Alpha strategy with “a broadly diversified portfolio of long market exposures to produce high risk-adjusted returns that have limited correlation to most other asset classes.”
The $132 billion Teacher Retirement System of Texas, Austin, was an early “launch investor,” allocating $250 million to the Optimal Portfolio on Feb. 2, Juliana Fernandez Helton, a TRS spokeswoman, said in an e-mail.
Bridgewater's new portfolio started trading on Feb. 1 and by April 30, was managing $10 billion with additional clients queued up for investment, said a source with knowledge of the strategy who asked not to be identified.
As of April 30, the breakdown of Bridgewater's aggregate $170 billion under management was 47% each in the Pure Alpha and All-Weather strategies and 6% in the Optimal Portfolio.