Bridgewater fends off Chinese ‘All Weather’ copycats

SHANGHAI/NEW YORK, Aug 8 (Reuters) – Billionaire hedge fund manager Ray Dalio’s huge popularity in China has not only attracted local investors to his funds, but also spawned local challengers using his strategy and brand.” All Weather” to try and beat him at his own game.

Now the Connecticut-based hedge fund giant he founded, Bridgewater Associates, is backtracking.

In recent months, Bridgewater has registered several “All Weather” trademarks in China in English and Chinese, an effort to combat the “confusion” created by local copycats, said Joanna Alpert, portfolio manager of Bridgewater China.

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“We will continue to enforce our rights and protect our intellectual property,” Alpert, also a Bridgewater partner, told Reuters. “It’s a challenge out there.”

Bridgewater – the world’s largest hedge fund firm with $150 billion in assets – overtook Winton and Man Group last year to become the top foreign hedge fund firm in the world’s second-largest economy.

Its “All Weather” strategy, a multi-asset investment approach structured to be indifferent to changing economic conditions, has caught on in China, where unpredictable “black swan” events, including Beijing’s tech crackdown, the Russian-Ukrainian war and COVID shutdowns have turbulent markets. Bridgewater launched its first onshore Chinese fund in 2018 and since then two more funds have been created.

The Chinese version of Dalio’s book, “Principles: Life and Work”, was a best-seller when it was released in 2018. Since then, Chinese hedge fund products with “All Weather” in their name have proliferated, with more than 100 such products registered with China Fund Association last year alone.

Bridgewater’s experiences reflect the opportunities and risks foreign consumer companies have long known in the vast Chinese market, where their brands are often copied and products imitated or reverse-engineered.

As China expands access to foreign asset managers, many will watch how Bridgewater handles the situation and whether its success can be sustained as competition intensifies.

Shang-Jin Wei, a Chinese business professor at Columbia Business School, said the widespread use of “All Weather” products risked damaging Bridgewater’s brand if money was lost or returns from imitators were mediocre.

Although trademarks help prevent others from creating new products with All Weather in their names, they do not guarantee legal victories against existing products with prior use, according to Jieyuan Cai, intellectual property attorney at YuandaWinston.

And registering the All Weather brand won’t stop Chinese asset managers from creating products with the same asset diversification strategy, said Liu Wencai, founder of risk management consultancy D-Union.

Launched in 1996, the All Weather strategy combines different assets, from equities to bonds to commodities to be indifferent to economic conditions and provide stable returns. But the proportion of assets, their specifics and how it plays with leverage are guarded as Bridgewater’s secret sauce.

“OPPORTUNITY AND CHALLENGE”

A Chinese hedge fund manager, Kai Jiang, said he read “Principles”, listened to Dalio’s speeches and studied his “All Weather” strategy before launching his own version, initially sold to institutional investors.

In June, Jiang’s China iFund Asset Management Co began marketing the products to high net worth individuals through Citic Bank’s private banking division, targeting a key customer base for Bridgewater in China.

Between January 2019 and April 2022, one of iFund’s ‘All Weather’ products generated annualized returns of 24.5%, higher than the 18.5% annualized return of Bridgewater China’s first product, according to leaked data. by the Society.

Zhan Ye, CEO of iFund, said that many Chinese fund managers use “All Weather” in their product names because it is an ideal investment strategy, and “we used this name to salute ” Dalio.

Bridgewater’s All Weather was not a registered trademark at the time of iFund’s product naming, and iFund said it would name such a strategy “Volatility Equilibrium” going forward.

Although Bridgewater is renowned at the global macro level, “we are more familiar with the granular structure of the local market at the micro level, so we can generate more excess returns,” he added. Bridgewater has not commented on this.

“We want to learn the essence, rather than being an imitator.”

Derek Scissors, chief economist at research firm China Beige Book International, said a brand shouldn’t be a long-term issue for funds as performance should prevail. “But if they (the challengers) have the mark and they outplay the outsiders, that would be a pretty serious problem.”

STRATEGIC IMPORTANCE

For Dalio, 73, a self-proclaimed Sinophile, China has always been about more than returns or assets under management.

Bridgewater said its assets under management (AUM) in China topped 10 billion yuan ($1.49 billion) last year, just 1% of its global business.

“We never thought we would make money there (with the China-based funds), and it didn’t matter,” said a person with knowledge of Bridgewater’s business location in the city. country, declining to be named. because they were not allowed to speak on the matter.

Dalio’s fascination with China began with a trip to Beijing in 1984, less than a decade after he founded Bridgewater in 1975 in his brownstone New York apartment.

His frequent visits helped to develop deep political ties in Beijing and to understand China’s growing role in the global economy.

“China has always been of particular strategic importance to Bridgewater,” said Bridgewater’s Alpert. “We can’t be a good global macro investor if we don’t understand China well.”

Dalio’s popularity in China is bolstered by his frequent predictions of the country’s rise, citing the history and cyclical nature of empires.

His personal Twitter account, like Weibo, has more than a million fans, and in April Dalio debuted on Douyin, the Chinese version of TikTok, quickly attracting over 300,000 followers.

D-Union’s Liu attributes Bridgewater’s initial success in China to Dalio’s “deep” global macro research, but also to his personal branding.

“In China, he promoted his books, gave speeches at various events and through social media, and won recognition from domestic investors. It is also a key factor in its success in China,” Liu said.

Analysts say those seeking to mirror Dalio’s success may struggle to emulate his political ties, including his longtime friendship with Vice Premier Wang Qishan, whom he described as “a hero” and “a very high level thinker” in his book.

Dalio wrote that he took Wang’s advice to improve Bridgewater’s governance model to heart.

“Every time I speak with Wang, I feel like I’m getting closer to discovering the unifying code that unlocks the laws of the universe.”

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Reporting by Samuel Shen in Shanghai, Carolina Mandl in New York and Rachael Levy in Washington; Editing by Sumeet Chatterjee and Lincoln Feast

Our standards: The Thomson Reuters Trust Principles.

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