About managed futures being the largest hedge fund category, and that $300 billion+ of managed futures assets under management (AUM) we see reported here and there (and in turn report here on our blog)… Turns out, after delving a little deeper into the numbers, that total AUM number from the BarclayHedge database includes Ray Dalio’s Bridgewater Associates – also known as the largest hedge fund in the world – in their managed futures AUM figures.
What does that mean for managed futures AUM? Well, with Bridgewater clocking in at a solid $122 billion under management, they make the total of $337 Billion about 56% higher than it would be otherwise (at $215 Billion without Bridgewater). And they are likely a big slice of managed futures asset growth, as well. We broke it out below (and also separated out the 2nd largest CTA on the list, Winton Capital Management’s $28 billion) to show just how much of the AUM total is made up by Bridgewater:
Problem is – we tend to think of Bridgewater as more of a global macro hedge fund… not really a Commodity Trading Advisor (CTA) which should be included in the managed futures numbers. Some cursory Googling of Bridgewater will show that they invest in things like stocks and inflation protected securities. They are registered with the NFA as a CTA, and they do have a bit of a managed futures performance profile, with gains in 2008 while most other hedge funds were down. And they do trade a LOT of futures and various futures markets. But they are seemingly always up, so we’re not sure how much that winning 2008 and the fact that they trade futures paints them as a managed futures program.
What about statistically? Well, Bridgewater’s Pure Alpha programs are actually more correlated to the BarclayHedge CTA index (+0.32) than they are to the BarclayHedge Hedge Index (+.017) providing an argument for inclusion, but the All Weather program clocks in at a correlation of just 0.13 versus the CTA index and 0.51 against the Hedge Index, making it appear much more apt for a hedge fund categorization. For comparison, Winton has a correlation of 0.72 against the CTA index.
We raised the subject with BarclayHedge owner Sol Waksman, and he explained that the BarclayHedge database and index has included Bridgewater since the very early days, and that the lack of correlation to the index makes sense for a primarily fundamental trader like Dalio. As for the true size of the industry, he believes BarclayHedge’s AUM numbers actually under-report the real number because there are many large pools of capital (such as large macro hedge funds, energy funds, and proprietary trading firms ) that “fly completely under the radar.”
So where does Bridgewater belong? Should they be in the managed futures number? Or should they only be counted toward the total AUM of hedge funds? Or does it matter at all?
The election may be over in the US, but we figured a question like this is a good one to put to you, the (managed futures) voter: