SHANGHAI/NEW YORK, Aug 8 (Reuters) – Billionaire hedge fund manager Ray Dalio’s huge popularity in China has not only attracted domestic investors flocking to his funds, but also spawned domestic challengers using his All Weather strategy and brand ” to try and beat him at his own game.
Now the Connecticut-based hedge fund giant Bridgewater Associates he founded is backing down.
In recent months, Bridgewater has registered several “All Weather” trademarks in China in English and Chinese in an effort to deal with the “confusion” created by local copycats, said Joanna Alpert, Bridgewater China’s portfolio manager.
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“We will continue to enforce our rights and protect our intellectual property,” Alpert, also a partner at Bridgewater, 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 No. 1 foreign hedge fund house in the world’s second-largest economy.
Its “All Weather” strategy, a multi-asset investment approach structured to be indifferent to changes in economic conditions, caught in China, where unpredictable “black swan” events, including Beijing’s technology crackdown, the Russia-Ukraine war and the blockade in COVID excited markets. Bridgewater launched its first onshore China fund in 2018, and two other funds have since been launched.
The Chinese version of Dalio’s book, Principles: Life and Work, was a bestseller when it debuted in 2018. Since then, Chinese hedge fund products with “All Weather” in their names have mushroomed, with more than 100 such products registered with the China Stock Association just last year.
Bridgewater’s experience reflects the opportunities and risks that foreign consumer firms have long faced in China’s vast market, where their brands are often copied and products imitated or reverse-engineered.
As China expands access to foreign asset managers, many will be watching to see how Bridgewater handles the situation and whether its success can be sustained with increasing competition.
Shang-Jin Wei, a professor of Chinese business at Columbia Business School, said the widespread use of all-weather products risks damaging Bridgewater’s brand if money is lost or returns from copycats are poor.
While registered trademarks will help keep others from creating new products with All Weather in their name, they do not guarantee legal victories against existing products with prior use, according to Jieyuan Cai, an intellectual property attorney at YuandaWinston.
And registering the All Weather trademark will not prevent Chinese asset managers from creating products with the same asset diversification strategy, said Liu Wenzai, founder of risk management consultancy D-Union.
Launched in 1996, the All Weather strategy combines a variety of assets, from stocks to bonds and commodities, to be indifferent to economic conditions and provide stable returns. But the asset ratio, its specifics and how it combines with leverage, are kept as Bridgewater’s secret sauce.
“OPPORTUNITY AND CHALLENGE”
One 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 offering the products to wealthy individuals through Citic Bank’s private bank arm, targeting a key client base for Bridgewater in China.
Between January 2019 and April 2022, one of iFund’s ‘All Weather’ products generated an annualized return of 24.5%, higher than the 18.5% annualized return of Bridgewater China’s first product, according to data disclosed from the company.
Zhang Ye, chief executive of iFund, said many Chinese fund managers used “All Weather” in their product names because it was an ideal investment strategy and “we used the name as a salute” to Dalio.
Bridgewater’s All Weather was not a registered trademark at the time of iFund’s product naming, and iFund said it would call such a strategy “Balance of Volatility” going forward.
While Bridgewater is known at the global macro level, “we are more familiar with the granular structure of the local market at the micro level so that we can generate more excess profits,” he added. Bridgewater did not comment on the matter.
“We want to learn the essence instead of being copycats.”
Derek Scissors, chief economist at research firm China Beige Book International, said branding should not be a long-term issue for funds as performance should prevail. “But if they (challengers) have the brand and outbid the foreigners, that would be a pretty serious problem.”
STRATEGIC SIGNIFICANCE
For Dalio, 73, a self-proclaimed Sinophile, China has always been about much 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 percent of its global business.
“We never had any expectations that we would make money there (with the China-based funds) and it didn’t matter,” said a person familiar with Bridgewater’s business organization in the country, who declined to be named because they were not authorized 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 New York brownstone apartment.
His frequent visits helped develop deep political ties in Beijing and an understanding of China’s growing role in the global economy.
“China has always been of special 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 has been overshadowed by his frequent predictions of the country’s rise, citing history and the cyclical nature of empires.
His personal account on the Twitter-like Weibo has more than 1 million fans, and in April Dalio made his debut on Douyin, China’s version of TikTok, quickly amassing more than 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 brand.
“In China, he has been promoting his books, giving speeches at various events and through social media, and gaining recognition from local investors. This is also a key factor in its success in China,” said Liu.
Analysts say those seeking to mirror Dalio’s success may struggle to emulate his political connections, including his longtime friendship with Vice Premier Wang Qishan, whom he describes as a “hero” and a “very high-level thinker.” in his book.
Dalio wrote that he took Wang’s advice to improve Bridgewater’s management model to heart.
“Every time I talk to Wang, I feel like I’m getting closer to cracking the unifying code that unlocks the laws of the universe.”
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Reporting by Samuel Shen in Shanghai, Carolina Mandel in New York and Rachel Levy in Washington; Editing by Sumeet Chatterjee and Lincoln Feast
Our standards: The Thomson Reuters Trust Principles.
Rachel Levy
Thomson Reuters
Award-winning journalist covering corporate governance. Her reports sparked federal and congressional investigations and were featured on television and podcasts. At Politico, her coverage of Covid-19 prompted the CDC to update guidance on N95 masks and the US hospital regulator to seek complaints about patient safety. A former Wall Street Journal financial reporter, her exclusive coverage of the Trump White House Kodak drug deal earned her and colleagues a 2021 Dateline Award from the Society of Professional Journalists.
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