Bridgewater's flagship macro fund posts double-digit gains this year, sources say

By Anirban Sen

NEW YORK, Oct 1 (Reuters) - Bridgewater Associates' flagship Pure Alpha macro fund climbed 18.4% in the first nine months of the year, people familiar with the matter told Reuters, after braving a volatile market backdrop during the quarter and a big selloff in artificial intelligence stocks in July.

Many global hedge funds gave up big gains during July due to the unwinding of technology-related trades. Since then, however, the industry has bounced back. In the first nine months of the year, the S&P 500 .SPX and the Nasdaq Composite .IXIC jumped 11.5% and 15.4%, respectively. Global hedge funds, on average, are up 7.25% so far this year, according to a September 25 note from Morgan Stanley that was sent to clients.

Bridgewater, which currently manages about $102 billion of assets, has in recent years bet on new strategies, including a fund that uses AI to make investment decisions.

The artificial intelligence-focused fund, or the AIA Macro fund, delivered a 16.4% gain during the same period until September 29, one of the sources said. Since its launch in late 2023, the AIA fund has posted an annualized return of 13.2% and currently manages over $4.5 billion.

Bridgewater's bet on the AI strategy started in 2018 under managing chief investment officer Greg Jensen, who leads the firm's 80-member Artificial Investor team and is an early investor in AI market leaders OpenAI and Anthropic. Jensen launched Bridgewater’s push into machine learning in 2012, as he hired Dave Ferrucci from IBM Watson. In 2018, he hired another top data scientist, Jas Sekhon, who currently serves as chief strategy officer at Google DeepMind.

The push into AI comes at a time when top researchers are warning that companies are doing too little to protect the ​world against the potentially disastrous fallout of building self-improving AI systems that could outpace humans' ability to control them.

In a recent column, Jensen argued that the government, rather than the industry, should set standards for how AI models are developed, released and used.

STRATEGIC OVERHAUL BOOSTS RETURNS

The latest returns come as Bridgewater is starting to see the benefits of the strategic overhaul orchestrated by CEO Nir Bar Dea in 2023 after he took over the reins of the firm founded by Ray Dalio.

Bridgewater has, to an extent, managed to reverse years of underperformance leading up to Bar Dea's appointment as co-CEO in 2022. Last year, Bridgewater's flagship macro fund delivered a record-breaking performance as it surged 34%, outperforming all its major hedge fund peers.

Dalio sold his remaining stake in the firm last year and stepped off the board, capping what was widely seen as a tumultuous leadership transition. Earlier this year, Bridgewater named one of its chief investment officers, Bob Prince, as the chair of its board of directors.

Westport, Connecticut-based Bridgewater was founded by Dalio out of his two-bedroom apartment in New York City in 1975. After taking over as CEO, Bar Dea undertook a strategic overhaul by restricting new inflows into Pure Alpha and returning some assets to clients, thereby shrinking the pool of money that the firm managed and betting that it would allow it to maximize returns.

The firm's other top executives include co-CIOs Karen Karniol-Tambour, Jensen and Prince. In January, Bridgewater promoted macro trader Ben Melkman to deputy chief investment officer, alongside David Trinh and Blake Cecil.