Bridgewater pushes again in opposition to Chinese language ‘All Climate’ copycats By Reuters
© Reuters. Ray Dalio, founder, co-chief funding officer and co-chairman of Bridgewater Associates, speaks on the 2019 New Economic system Discussion board in Beijing, China November 21, 2019. REUTERS/Jason Lee/File Picture
By Samuel Shen, Carolina Mandl and Rachael Levy
SHANGHAI/NEW YORK (Reuters) – Billionaire hedge fund supervisor Ray Dalio’s enormous reputation in China has not solely drawn native traders flocking to his funds but additionally spawned home-grown challengers utilizing his “All Climate” technique and model to attempt to beat him at his personal recreation.
Now, the Connecticut-based hedge fund large he based, Bridgewater Associates, is pushing again.
In latest months, Bridgewater registered in China a number of “All Climate” emblems in English and Chinese language, an effort to deal with the “confusion” created by native copycats, mentioned Joanna Alpert, Bridgewater China’s portfolio supervisor.
“We’ll proceed to implement our rights and shield our IP,” Alpert, additionally a companion at Bridgewater, instructed Reuters. “It is a problem on the market.”
Bridgewater – the world’s largest hedge fund agency with $150 billion in belongings – raced previous Winton and Man Group final yr to turn into the No.1 international hedge fund home on the earth’s second largest financial system.
Its “All Climate” technique, a multi-asset funding method structured to be detached to shifts in financial circumstances, caught on in China, the place unpredictable “black swan” occasions together with Beijing’s tech crackdown, the Russia-Ukraine battle, and COVID lockdowns have roiled markets. Bridgewater launched its first onshore China fund in 2018 and, since then, two different funds have been established.
The Chinese language model of Dalio’s guide, “Ideas: Life and Work”, was a bestseller when it debuted in 2018. Since then, Chinese language hedge fund merchandise with “All Climate” of their names have mushroomed, with greater than 100 such merchandise registered with China’s fund affiliation final yr alone.
Bridgewater’s experiences replicate the alternatives and dangers that international client corporations have lengthy skilled in China’s huge market, the place their manufacturers are sometimes copied and merchandise imitated or reverse-engineered.
As China expands entry to international asset managers, many will likely be watching how Bridgewater handles the scenario and whether or not its success could be maintained as competitors heats up.
Shang-Jin Wei, professor of Chinese language Enterprise at Columbia Enterprise Faculty, mentioned widespread use of “All Climate” merchandise risked damaging Bridgewater’s model if cash was misplaced or returns of copycats had been poor.
Though registered emblems will assist stop others from creating new merchandise with All Climate of their names, they don’t assure authorized victories in opposition to present merchandise with prior use, in keeping with Jieyuan Cai, an mental property lawyer at YuandaWinston.
And registering the All Climate trademark will not stop Chinese language asset managers creating merchandise with the identical asset diversification technique, mentioned Liu Wencai，founding father of risk-management consultancy D-Union.
Launched in 1996, the All Climate technique combines totally different belongings, from equities to bonds and commodities to be detached to financial circumstances and supply steady returns. However the proportion of belongings, their specifics and the way it performs with leverage are saved as Bridgewater’s secret sauce.
‘OPPORTUNITY AND CHALLENGE’
One Chinese language hedge fund supervisor, Kai Jiang, mentioned he had learn “Ideas”, listened to Dalio’s speeches and studied his “All Climate” technique earlier than launching his personal model, initially bought to institutional traders.
In June, Jiang’s China iFund Asset Administration Co began advertising the merchandise to high-net-worth people by Citic Financial institution’s non-public financial institution division, focusing on a key buyer base for Bridgewater in China.
Between January 2019 and April 2022, considered one of iFund’s “All Climate” merchandise generated annualised returns of 24.5%, larger than the annualised 18.5% return from Bridgewater China’s first product, in keeping with knowledge disclosed by the corporate.
Zhan Ye, iFund CEO, mentioned many Chinese language fund managers used “All Climate” of their product names as a result of it is a perfect funding technique, and “we used the title as a salute” to Dalio.
Bridgewater’s All Climate wasn’t a registered trademark on the time of iFund’s product naming, and iFund mentioned it might title such a method “Volatility Equilibrium” going ahead.
Though Bridgewater is famend on the worldwide macro stage, “we’re extra aware of granular construction of the native market on a micro stage, in order that we will generate extra extra returns,” he added. Bridgewater didn’t touch upon the matter.
“We need to study the essence, somewhat than being a copycat.”
Derek Scissors, chief economist at analysis agency China Beige Guide Worldwide, mentioned a trademark should not be a long-term difficulty for funds as efficiency ought to prevail. “But when they (challengers) have the model they usually outperform the foreigners, that might be a somewhat major problem.”
For the 73-year-old Dalio, a self-proclaimed Sinophile, China has all the time been about far more than returns or belongings below administration.
Bridgewater reported its belongings below administration (AUM) in China exceeded 10 billion yuan ($1.49 billion) final yr, simply 1% of its international enterprise.
“We by no means had any expectations that we might make any cash there (with the China-based funds), and it did not matter,” mentioned an individual with data of Bridgewater’s enterprise set-up within the nation, declining to be named as a result of they weren’t authorised to talk on the matter.
Dalio’s fascination with China began with a 1984 journey to Beijing, lower than a decade after founding Bridgewater in 1975 in his New York Metropolis brownstone condominium.
His frequent visits have helped develop deep political connections in Beijing and an understanding of China’s rising function within the international financial system.
“China has all the time had particular strategic significance for Bridgewater,” Bridgewater’s Alpert mentioned. “We won’t be a great international macro investor if we do not perceive China effectively.”
Dalio’s reputation inside China is burnished by his frequent predicting of the rise of the nation, citing historical past and the cyclical nature of empires.
His private account on the Twitter-like Weibo (NASDAQ:) has greater than 1 million followers, and in April Dalio made his debut on Douyin, the Chinese language model of TikTok, swiftly attracting greater than 300,000 followers.
D-Union’s Liu attributes Bridgewater’s preliminary China success to Dalio’s “profound” international macro analysis, but additionally his private branding.
“In China, he promoted his books, made speeches at varied occasions and through social media, and received recognition from home traders. That is additionally a key issue of his success in China,” Liu mentioned.
Analysts say these looking for to reflect Dalio’s success might discover it troublesome to emulate his political ties, together with his long-time friendship with Vice Premier Wang Qishan, whom he described as “a hero” and “a really excessive stage thinker” in his guide.
Dalio wrote that he took Wang’s recommendation to coronary heart to enhance Bridgewater’s governance mannequin.
“Each time I converse with Wang, I really feel like I get nearer to cracking the unifying code that unlocks the legal guidelines of the universe.”