Bridgewater's Pure Alpha II Ends 2023 in the Red After Late-Quarter Losses

Bridgewater Associates' flagship macro hedge fund, Pure Alpha II, ended 2023 in negative territory, experiencing a 7.6% decline for the year despite a promising start. The fund had been up 7.5% year-to-date until November and December, when it lost about 14% of its value, according to sources familiar with its performance, as reported by Bloomberg.

The losses came amid a remarkable rally in global markets. During the final two months of the year, global bonds saw their largest two-month gain since at least 1990, and US equities rose by 14%, which placed significant pressure on the fund’s positioning. Bridgewater's investment strategy, which typically includes a blend of global macroeconomic bets, struggled as market conditions favoured assets not aligned with the fund's outlook.

In contrast, Bridgewater's long-only All Weather fund performed more favourably, delivering a return of 10.6% over the course of 2023. This difference in performance highlights the challenging environment for the firm's more tactical and diversified macro approach during periods of sharp market rallies.

Pure Alpha II's underperformance in the final months of 2023 mirrored a similar pattern in the previous year. In 2022, the fund posted a notable gain of 9.4%, recovering from losses earlier in the year, but had been up by as much as 22% at one point.