Reuters: Ray Dalio’s reputation in China has enticed local investors to his funds and produced home-grown adversaries leveraging his “All Weather” strategy and brand to fight him.
Bridgewater Associates, the hedge fund he created, is fighting back.
Bridgewater secured “All Weather” trademarks in English and Chinese in China to combat local copycats, said Bridgewater China’s portfolio manager Joanna Alpert.
Alpert, a Bridgewater partner, told Reuters, “We’ll safeguard our IP.” It’s difficult.
Bridgewater, the world’s largest hedge fund firm with $150 billion in assets, surpassed Winton and Man Group to become the No. 1 foreign hedge fund house in the world’s second largest economy.
Its “All Weather” strategy, a multi-asset investment method indifferent to economic conditions, gained on in China, where unpredictable “black swan” events like Beijing’s tech crackdown, the Russia-Ukraine war, and COVID lockdowns have roiled markets. Bridgewater launched its first onshore China fund in 2018, and two more followed.
“Principles: Life and Work” was a 2018 bestseller in China. Since then, more than 100 “All Weather” hedge fund products were registered with China’s fund association last year.
Foreign consumer enterprises have long faced opportunities and hazards in China’s large market, where their names are often pirated and items imitated or reverse-engineered.
As China opens up to foreign asset managers, many will monitor Bridgewater to see if it can retain its performance as competition heats up.
Professor Shang-Jin Wei of Columbia Business School warned widespread adoption of “All Weather” items may damage Bridgewater’s brand if money was lost or copycats had poor returns.
Registered trademarks prevent competitors from manufacturing new products with All Weather in the name, but they don’t guarantee legal victory against existing ones, says Jieyuan Cai, an intellectual property lawyer at YuandaWinston.
Liu Wencai, founder of risk-management consultancy D-Union, said trademarking All Weather won’t stop Chinese asset managers from producing products using the same asset diversification technique.
The All Weather strategy mixes stocks, bonds, and commodities to generate stable returns regardless of economic conditions. Bridgewater’s secret sauce is its asset mix, specificity, and leverage.
opportunity and challenge
Kai Jiang, a Chinese hedge fund manager, said he read “Principles,” attended to Dalio’s speeches, and studied his “All Weather” strategy before starting his own version.
In June, Jiang’s China iFund Asset Management Co began marketing the products to high-net-worth people through Citic Bank’s private bank division.
iFund’s “All Weather” product achieved annualized returns of 24.5% between January 2019 and April 2022, better than Bridgewater China’s initial product’s 18.5% return.
Zhan Ye, CEO of iFund, said many Chinese fund managers employ “All Weather” because it’s an outstanding investment approach. “We used the term as a compliment” to Dalio.
Bridgewater’s All Weather wasn’t a registered trademark when iFund named their product, so it called the technique “Volatility Equilibrium.”
Bridgewater is well-known on the global macro level, but “we’re more familiar with the local market’s micro structure,” he said. Bridgewater was silent.
“We want to understand, not copy.”
Derek Scissors, chief economist at China Beige Book International, said performance should trump a brand. If competitors have the brand and outperform foreigners, that’s an issue.
SIGNIFICANCE
China has always been about more than returns or AUM for Dalio, 73.
Bridgewater’s AUM in China was $1.49 billion last year, 1% of its global business.
“We never expected to earn money there (with China-based funds), and it didn’t matter,” said a person familiar with Bridgewater’s business setup in the nation.
In 1984, less than a decade after launching Bridgewater in his New York City brownstone, Dalio visited Beijing.
His regular visits to Beijing have helped him appreciate China’s expanding significance in the global economy.
Bridgewater’s Alpert said China has always been strategic. If we don’t understand China, we can’t be excellent global macro investors.
Dalio’s fame in China stems from his frequent predictions of the country’s ascent, referencing history and imperial cycles.
His personal account on Twitter-like Weibo (NASDAQ:WB) has more than 1 million subscribers, and in April he debuted on Douyin, the Chinese version of TikTok.
D-Liu Union’s credits Dalio’s “deep” global macro analysis and personal branding for Bridgewater’s China success.
“In China, he promoted his books, gave lectures at events and on social media, and garnered investors’ respect. This contributes to his success in China “”Liu”
Analysts say others pursuing Dalio’s success may find it difficult to duplicate his political links, including his friendship with Vice Premier Wang Qishan, whom he called a “hero” and “high-level thinker” in his book.
Dalio heeded Wang’s advice to improve Bridgewater’s governance.
“Every time I talk to Wang, I feel closer to unlocking the universe’s laws.”
