Dalio's Bridgewater launches new 'optimal' hedge fund

Ray Dalio, founder of Bridgewater Associates.
Getty Images

Hedge fund behemoth Bridgewater Associates is poised to grow even larger.

Already the world's biggest hedge fund firm at $157 billion under management, the Westport, Connecticut-based money manager founded by Ray Dalio is launching its first new strategy since 1996. Dubbed "Bridgewater Optimal Portfolio," it will combine the firm's main investing styles, "Pure Alpha" and "All Weather."

Pure Alpha is a traditional hedge fund strategy that actively bets on the direction of various types of securities—including stocks, bonds, commodities and currencies—by predicting macroeconomic trends.

All Weather is a so-called risk-parity or leveraged beta strategy, which holds steady investments in stocks, bonds and commodities that in theory will make money in any economic environment, including inflation or deflation, in cases of either high or low growth. Bonds in the portfolio are often modestly levered—using borrowed money rather than cash—to increase their return, which can help make up for equity market losses. Bridgewater pioneered the strategy, which has now been copied by other money managers.