Image Source: Pixabay

Year after year many wonder why does Bridgewater - reportedly the world's largest hedge fund but far smaller than such true hedge fund titans like the Swiss National Bank and the Bank of Japan (which overnight was out buying Japanese ETFs for the first time since June) - manage more than $100 billion, and year after year they are left wondering since the fund keeps posting at best meddling, middle-of-the-road (if not much worse) returns. Then, in 2022, the fund came this close to finally redeeming its skeptics... but in the end no such luck.

According to Bloomberg, Bridgewater erased most of the returns it had generated through this year’s first three quarters, "ruining what was shaping up to be the hedge fund giant’s best annual performance in more than a decade".

After surging an impressive 22% as of the end of September, putting it on track for its best year since 2010, when it rose about 27%, Bridgewater's Pure Alpha fund tumbled about 13% in the fourth quarter through November, cutting its year-to-date gain to a paltry 6%, Meanwhile, Bridgewater’s bigger and more-leveraged Pure Alpha II fund tumbled about 20% in the two months through Nov. 30, paring its 2022 advance to 7.8%.

It wasn't immediately clear how Bridgewater's risk-parity All Weather fund did in 2022, but judging by the collapse in rates, we doubt it was in the green.

It also wasn't clear what sparked the sharp reversal but as Bloomberg notes, Bridgewater’s macro-trading peers have made money for most of this year by betting on rising interest rates, a strong dollar and falling stocks. Those trends reversed in recent weeks as the Federal Reserve signaled that it would slow the pace of monetary tightening.

Yields on 10-year Treasuries dropped to about 3.5% now from roughly 4.2% in early November. The dollar has tumbled against all major currencies since the end of September, and equity markets rebounded sharply.

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