SHANGHAI/NEW YORK, Aug 8 (Reuters) – Billionaire hedge fund supervisor Ray Dalio’s big reputation in China has not solely drawn native buyers flocking to his funds but additionally spawned home-grown challengers utilizing his “All Climate” technique and model to attempt to beat him at his personal sport.
Now, the Connecticut-based hedge fund big he based, Bridgewater Associates, is pushing again.
In current months, Bridgewater registered in China a number of “All Climate” logos in English and Chinese language, an effort to deal with the “confusion” created by native copycats, stated Joanna Alpert, Bridgewater China’s portfolio supervisor.
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“We’ll proceed to implement our rights and defend our IP,” Alpert, additionally a associate at Bridgewater, instructed Reuters. “It is a problem on the market.”
Bridgewater – the world’s largest hedge fund agency with $150 billion in property – raced previous Winton and Man Group final yr to grow to be the No.1 overseas hedge fund home on the earth’s second largest economic system.
Its “All Climate” technique, a multi-asset funding strategy structured to be detached to shifts in financial situations, caught on in China, the place unpredictable “black swan” occasions together with Beijing’s tech crackdown, the Russia-Ukraine battle, and COVID lockdowns have roiled markets. Bridgewater launched its first onshore China fund in 2018 and, since then, two different funds have been established.
The Chinese language model of Dalio’s guide, “Rules: Life and Work”, was a bestseller when it debuted in 2018. Since then, Chinese language hedge fund merchandise with “All Climate” of their names have mushroomed, with greater than 100 such merchandise registered with China’s fund affiliation final yr alone.
Bridgewater’s experiences replicate the alternatives and dangers that overseas shopper companies have lengthy skilled in China’s huge market, the place their manufacturers are sometimes copied and merchandise imitated or reverse-engineered.
As China expands entry to overseas asset managers, many shall be watching how Bridgewater handles the state of affairs and whether or not its success may be maintained as competitors heats up.
Shang-Jin Wei, professor of Chinese language Enterprise at Columbia Enterprise College, stated widespread use of “All Climate” merchandise risked damaging Bridgewater’s model if cash was misplaced or returns of copycats have been poor.
Though registered logos will assist stop others from creating new merchandise with All Climate of their names, they don’t assure authorized victories in opposition to current merchandise with prior use, in accordance with Jieyuan Cai, an mental property lawyer at YuandaWinston.
And registering the All Climate trademark will not stop Chinese language asset managers creating merchandise with the identical asset diversification technique, stated Liu Wencai，founding father of risk-management consultancy D-Union.
Launched in 1996, the All Climate technique combines totally different property, from equities to bonds and commodities to be detached to financial situations and supply steady returns. However the proportion of property, their specifics and the way it performs with leverage are stored as Bridgewater’s secret sauce.
‘OPPORTUNITY AND CHALLENGE’
One Chinese language hedge fund supervisor, Kai Jiang, stated he had learn “Rules”, listened to Dalio’s speeches and studied his “All Climate” technique earlier than launching his personal model, initially offered to institutional buyers.
In June, Jiang’s China iFund Asset Administration Co began advertising and marketing the merchandise to high-net-worth people by Citic Financial institution’s personal financial institution division, concentrating on a key buyer base for Bridgewater in China.
Between January 2019 and April 2022, one in every of iFund’s “All Climate” merchandise generated annualised returns of 24.5%, larger than the annualised 18.5% return from Bridgewater China’s first product, in accordance with knowledge disclosed by the corporate.
Zhan Ye, iFund CEO, stated many Chinese language fund managers used “All Climate” of their product names as a result of it is a perfect funding technique, and “we used the identify as a salute” to Dalio.
Bridgewater’s All Climate wasn’t a registered trademark on the time of iFund’s product naming, and iFund stated it could identify such a technique “Volatility Equilibrium” going ahead.
Though Bridgewater is famend on the worldwide macro stage, “we’re extra acquainted with granular construction of the native market on a micro stage, in order that we will generate extra extra returns,” he added. Bridgewater didn’t touch upon the matter.
“We need to study the essence, fairly than being a copycat.”
Derek Scissors, chief economist at analysis agency China Beige E-book Worldwide, stated a trademark should not be a long-term concern for funds as efficiency ought to prevail. “But when they (challengers) have the model and so they outperform the foreigners, that may be a fairly major problem.”
STRATEGIC SIGNIFICANCE
For the 73-year-old Dalio, a self-proclaimed Sinophile, China has all the time been about way more than returns or property beneath administration.
Bridgewater reported its property beneath administration (AUM) in China exceeded 10 billion yuan ($1.49 billion) final yr, simply 1% of its international enterprise.
“We by no means had any expectations that we would make any cash there (with the China-based funds), and it did not matter,” stated an individual with information of Bridgewater’s enterprise set-up within the nation, declining to be named as a result of they weren’t authorised to talk on the matter.
Dalio’s fascination with China began with a 1984 journey to Beijing, lower than a decade after founding Bridgewater in 1975 in his New York Metropolis brownstone house.
His frequent visits have helped develop deep political connections in Beijing and an understanding of China’s rising function within the international economic system.
“China has all the time had particular strategic significance for Bridgewater,” Bridgewater’s Alpert stated. “We will not be international macro investor if we do not perceive China nicely.”
Dalio’s reputation inside China is burnished by his frequent predicting of the rise of the nation, citing historical past and the cyclical nature of empires.
His private account on the Twitter-like Weibo has greater than 1 million followers, and in April Dalio made his debut on Douyin, the Chinese language model of TikTok, swiftly attracting greater than 300,000 followers.
D-Union’s Liu attributes Bridgewater’s preliminary China success to Dalio’s “profound” international macro analysis, but additionally his private branding.
“In China, he promoted his books, made speeches at numerous occasions and by way of social media, and gained recognition from home buyers. That is additionally a key issue of his success in China,” Liu stated.
Analysts say these searching for to reflect Dalio’s success might discover it tough to emulate his political ties, together with his long-time friendship with Vice Premier Wang Qishan, whom he described as “a hero” and “a really excessive stage thinker” in his guide.
Dalio wrote that he took Wang’s recommendation to coronary heart to enhance Bridgewater’s governance mannequin.
“Each time I communicate with Wang, I really feel like I get nearer to cracking the unifying code that unlocks the legal guidelines of the universe.”
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Reporting by Samuel Shen in Shanghai, Carolina Mandl in New York and Rachael Levy in Washington; Modifying by Sumeet Chatterjee and Lincoln Feast
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