Bridgewater's main hedge fund loses about 20% in Q1

Ray Dalio's flagship hedge fund at Bridgewater Associates ended the first quarter down about 20%, according to people with knowledge of the matter.

Bridgewater extended this year's decline after getting caught on the wrong side of the market sell-off that began in late February as a result of the rapidly spreading coronavirus. The firm's Pure Alpha II strategy fell about 16% in March after posting smaller losses in the first two months of the year, said the people, who asked not to be identified because the information isn't public.

Mr. Dalio, who earlier this year urged investors not to miss out on an opportunity to benefit from strong markets, wrote in mid-March that the pandemic hit the firm at the "worst possible moment" because Bridgewater's portfolios were tilted to benefit from a rise in the market. Bridgewater, with roughly $160 billion in assets, manages the world's biggest hedge fund.

The firm's Pure Alpha Major Markets fund, which invests in a subset of the markets traded by the broader strategy, fared better. The largest version of the major markets strategy, which targets volatility of 14%, fell about 3% in March, bringing year-to-date losses to about 8.5%, according to one of the people.

Bridgewater started tracking the virus in January and discussed whether the firm should override its system to alter the way it was trading. Mr. Dalio's team decided against it. In his mid-month note, Mr. Dalio also moved to calm his investors, writing that the portfolios remain liquid and in a position to provide clients "liquidity rather than prohibit" them from getting it.

Mr. Dalio said the firm is "delving deeply into the impacts of the virus by companies and sectors and how to measure viruses emerging in various places so that we will be able to have an edge as the coronavirus wave passes from place to place and if it or another virus comes back."

In contrast, macro firm Brevan Howard Asset Management had its best month ever, jumping about 18% in March in its flagship fund, according to people familiar with the performance. That brought its year-to-date gain to 23%.

Representatives for Brevan Howard and Bridgewater declined to comment.

Like Westport, Conn.-based Bridgewater, the industry has seen other funds post double-digit losses.

Oceanwood Capital Management's Opportunities Master Fund fell 20% last month before fees, according to an investor document seen by Bloomberg. The London-based firm, founded in 2006 by former Tudor Investment Corp. executive Christopher Gate, declined to comment. It wagers on and against companies involved in events including mergers, restructurings and spin-outs.