Bridgewater Pushes Back Against Chinese 'All Weather' Copycats
Billionaire hedge fund manager Ray Dalio's huge popularity in China has not only drawn local investors flocking to his funds but also spawned home-grown challengers using his "All Weather" strategy and brand to try to beat him at his own game.
Now, the Connecticut-based hedge fund giant he founded, Bridgewater Associates, is pushing back.
In recent months, Bridgewater registered in China several "All Weather" trademarks in English and Chinese, an effort to tackle the "confusion" created by local copycats, said Joanna Alpert, Bridgewater China's portfolio manager.
"We'll continue to enforce our rights and protect our IP," Alpert, also a partner at Bridgewater, told Reuters. "It's a challenge out there."
Bridgewater - the world's biggest hedge fund firm with $150 billion in assets - raced past 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 shifts in economic conditions, caught on in China, where unpredictable "black swan" events including Beijing's tech crackdown, the Russia-Ukraine war, and COVID lockdowns have roiled markets. Bridgewater launched its first onshore China fund in 2018 and, since then, two other funds have been established.
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 China's fund association last year alone.
Bridgewater's experiences reflect the opportunities and risks that foreign consumer firms have long experienced 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 how Bridgewater handles the situation and whether its success can be maintained as competition heats up.
Shang-Jin Wei, professor of Chinese Business at Columbia Business School, said widespread use of "All Weather" products risked damaging Bridgewater's brand if money was lost or returns of copycats were poor.
Although registered trademarks will help prevent others from creating new products with All Weather in their names, they do not guarantee legal victories against existing products with prior use, according to Jieyuan Cai, an intellectual property lawyer at YuandaWinston.
And registering the All Weather trademark won't prevent Chinese asset managers creating products with the same asset diversification strategy, said Liu Wencai,founder of risk-management consultancy D-Union.
Launched in 1996, the All Weather strategy combines different assets, from equities to bonds and commodities to be indifferent to economic conditions and provide stable returns. But the proportion of assets, their specifics and how it plays with leverage are kept as Bridgewater's secret sauce.
'OPPORTUNITY AND CHALLENGE'
One Chinese hedge fund manager, Kai Jiang, said he had 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 started marketing the products to high-net-worth individuals through Citic Bank's private bank division, targeting a key customer base for Bridgewater in China.
Between January 2019 and April 2022, one of iFund's "All Weather" products generated annualised returns of 24.5%, higher than the annualised 18.5% return from Bridgewater China's first product, according to data disclosed by the company.
Zhan Ye, iFund CEO, said many Chinese fund managers used "All Weather" in their product names because it is an ideal investment strategy, and "we used the name as a salute" to Dalio.
Bridgewater's All Weather wasn't a registered trademark at the time of iFund's product naming, and iFund said it would name such a strategy "Volatility Equilibrium" going forward.
Although Bridgewater is renowned on the global macro level, "we're more familiar with granular structure of the local market on a micro level, so that we can generate more excess returns," he added. Bridgewater did not comment on the matter.
"We want to learn the essence, rather than being a copycat."
Derek Scissors, chief economist at research firm China Beige Book International, said a trademark shouldn't be a long-term issue for funds as performance should prevail. "But if they (challengers) have the brand and they outperform the foreigners, that would be a rather serious problem."
STRATEGIC SIGNIFICANCE
For the 73-year-old Dalio, a self-proclaimed Sinophile, China has always been about much more than returns or assets under management.
Bridgewater reported its assets under management (AUM) in China exceeded 10 billion yuan ($1.49 billion) last year, just 1% of its global business.
"We never had any expectations that we'd make any money there (with the China-based funds), and it didn't matter," said a person with knowledge of Bridgewater's business set-up in the country, declining to be named because they were not authorised to speak on the matter.
Dalio's fascination with China started with a 1984 trip to Beijing, less than a decade after founding Bridgewater in 1975 in his New York City brownstone apartment.
His frequent visits have helped develop deep political connections in Beijing and an understanding of China's growing role in the global economy.
"China has always had special strategic significance for Bridgewater," Bridgewater's Alpert said. "We can't be a good global macro investor if we don't understand China well."
Dalio's popularity within China is burnished by his frequent predicting of the rise of the country, 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, the Chinese version of TikTok, swiftly attracting more than 300,000 followers.
D-Union's Liu attributes Bridgewater's initial China success to Dalio's "profound" global macro research, but also his personal branding.
"In China, he promoted his books, made speeches at various events and via social media, and won recognition from domestic investors. This is also a key factor of his success in China," Liu said.
Analysts say those seeking to mirror Dalio's success may find it difficult to emulate his political ties, including his long-time friendship with Vice Premier Wang Qishan, whom he described as "a hero" and "a very high level thinker" in his book.
Dalio wrote that he took Wang's advice to heart to improve Bridgewater's governance model.
"Every time I speak with Wang, I feel like I get closer to cracking the unifying code that unlocks the laws of the universe."
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