Ray Dalio’s hedge fund firm, Bridgewater Associates, is launching a sustainability strategy in Europe, upping its exposure to the environmental, social, and governance (ESG) investing trend.
Bridgewater, the world’s largest hedge operation with $140 billion in assets, aims to open a sustainable fund next year. Dalio is no stranger to ESG efforts: In 2018, he and fellow billionaire Mike Bloomberg announced a marine biology venture focused on ocean conservation. Bridgewater previously has advised clients on ESG investing.
The Dalio firm has partnered with Lyxor Asset Management, a subsidiary of French bank Societe Generale, and will offer ESG investments in Europe—via a UCITS (Undertakings for Collective Investment in Transferable Securities) structure, a cross between a mutual fund and a hedge fund.
Lyxor already has $15 billion in ESG investments. The new joint endeavor’s investment philosophy will borrow from Bridgewater’s quarter-century-old All Weather strategy. That’s a flexible approach that seeks to profit in all kinds of economic circumstances.
“The journey of scalable sustainable investing is a strategic priority for Bridgewater and our clients,” said Brian Kreiter, Bridgewater’s chief operating officer (COO), in a statement. “Using the same research process that we have developed over the last 40 years, we have built a systematic process to engineer both the sustainability and financial characteristics of portfolios.”
Bridgewater’s new strategy will invest along the lines set down in the United Nations’ Sustainable Development Goals, which aim to mitigate climate change, and also to fight poverty and inequality.
Dalio has long worried about the dire state of civilization. His new book, The Changing World Order, seeks to analyzes its woes and prescribes ways of dealing with vexing macro problems. In a recent excerpt from the book, posted on LinkedIn, he wrote that disorder is growing in the US, where “people and politicians are now at each other’s throats to a degree greater than at any time in my 71 years—and these struggles over wealth and power are becoming more vicious.”
How the Lyxor partnership fares will be interesting. ESG strategies have attracted criticism for years that they are not a winning investment credo. More recently, ESG’s defenders have argued that this investing approach heads off serious problems a company might have with ethics or environmentally destructive ways.
Bridgewater apparently has hit some rough patches of late, and suffered some client withdrawals, although ESG orientation appears to have nothing to do with this. Its flagship Pure Alpha II fund has lost 18.6% through early November, and suffered some client departures, according to Bloomberg News. On the other hand, the All Weather strategy returned 5.7% this year through November, the news service reported. Bridgewater hasn’t commented publicly on any of this.
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Tags: All Weather strategy, Bridgewater, ESG, Europe, Lyxor Asset Management, Mike Bloomberg, Pure Alpha II, Ray Dalio, Société Générale, UCITS