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Dalio partner defends 'all weather' portfolio strategy

Wednesday, 17 Jul 2013 | 9:39 AM ET
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Wednesday, 17 Jul 2013 | 8:03 AM ET
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Investors are increasingly recognizing that generating alpha in their portfolios is difficult in this environment, the co-president of the world's largest hedge fund told CNBC on Wednesday.

"There's lot of uncertainty," said David McCormick of Ray Dalio's Bridgewater Associates. "You see investors increasingly moving to a more balanced portfolio."

McCormick appeared on "Squawk Box" from New York at the Delivering Alpha Conference, presented by CNBC and Institutional Investor. Alpha is defined by the return of an investment in excess of its comparable benchmark index.

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With $150 billion in assets under management, Bridgewater primarily uses two different strategies: an "all weather" approach and a "pure alpha" approach.

In the "pure alpha" strategy, McCormick described that Bridgewater is "taking particular positions." And currently, "we're long equities and also long bonds," he added.

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"The all weather strategy is a portfolio of assets that we hold over time," he said.

Last month, reports said the Bridgewater All Weather Fund was down about 6 percent through June, and down 8 percent for all of 2013. The fund rose 14.7 percent in 2012, according to a year-end investor note.

"If you look at All Weather, we would say that it's performed just as we would have expected," McCormick countered. "If you step back and look over 18 years, it's had something like 8 percent performance annually ahead of fees."

Despite the recent volatility in stocks and bonds, McCormick said that things are "beginning to return to normal conditions."

But when that happens, he added, "you would expect to see investors to begin to move out the risk curve in terms of the assets they're holding."

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. Maneet Ahuja, CNBC's hedge fund specialist, contributed to this report. Follow her on Twitter @WallStManeet.

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