Dalio’s Hedge Fund Dangers Being Dumped by Pension on Weak Returns

(Bloomberg) — A California county’s $21 billion pension is contemplating whether or not to drop Ray Dalio’s hedge fund after it underperformed for many of the previous 16 years.

The Orange County Staff Retirement System’s funding in Bridgewater Associates’s Pure Alpha fund has returned an annualized 4.5% since 2005, about 2.5 share factors lower than its benchmark, based on a memo seen by Bloomberg from Meketa Funding Group, the pension’s guide. The technique has topped OCERS’s goal solely as soon as prior to now 5 years and has trailed on a seven- and 10-year time horizon.

Molly Murphy, the pension’s chief funding officer, really helpful inserting Bridgewater Pure Alpha on the pension’s watch record. A gaggle of Meketa consultants concurred, including that they’d “consider potential replacements if wanted,” based on the Aug. 25 memo.

Whereas the $175 million that Bridgewater oversees for OCERS is a fraction of the roughly $105 billion it manages in hedge funds, Meketa’s advice to place the longtime stake on watch may trigger different shoppers to exit. Meketa is likely one of the bigger funding consultants, with $1.6 trillion below advisory.

“Sometimes, if a consulting agency recommends placing a cash supervisor on a watch record for one shopper, there’s a superb likelihood it’ll achieve this with its different shoppers, too,” stated Brad Alford, head of Alpha Capital Administration in Atlanta, which performs guide and outsourced CIO searches for establishments. “This might spell hassle for Bridgewater.”

A spokeswoman for Westport, Connecticut-based Bridgewater declined to remark. Meketa’s consultants didn’t reply to emails searching for additional remark.

Bridgewater has come below scrutiny from Meketa consultants earlier than. In January 2019, the agency was jettisoned by San Joaquin County, California’s pension, which cited excessive charges and low returns for the Pure Alpha II hedge fund. The county’s guide, Pension Consulting Alliance, first really helpful placing the $81 million funding with Bridgewater below overview in November 2017.

Pension Consulting Alliance was within the means of merging with Meketa on the time, and its founder, Allan Emkin, is now a guide for Orange County.

Being on watch with OCERS might not finish with the pension dumping Bridgewater. Meketa’s consultants famous in final week’s memo that many different macro funds have additionally struggled lately due to low volatility in international markets. Bridgewater has lately “tried to enhance the technique’s potential to persistently meet their threat and return targets by making varied enhancements,” they wrote.

Bridgewater’s Pure Alpha represents virtually 10% of OCERS’s threat mitigation asset class and 43% of its international macro sub-component, based on the memo.

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