Chart of the Week: Bridgewater All Weather and Permanent Portfolio

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Progenitors of risk parity and TIPS, facilitators of the Chicken McNugget, and managers of the world’s largest hedge fund, Bridgewater Associate’s now $65bn All Weather Fund has become legend amongst institutional investors (to say nothing of other asset management firms) looking to weatherproof their beta and modernize their portfolios. Predicated on Ray Dalio, Bob Prince and Greg Jensen’s belief that there will always be surprises, and guessing which will be next is a fool’s errand, the strategy apparently balances a portfolio’s risk in an effort to perform in any economic environment “the machine” can throw at an investor.

Seeking to ensure the world’s largest hedge fund strategy doesn’t outgrow its ability to meet its objectives, Bridgewater will launch an alternative version of the All Weather fund later this year, according to the Wall Street Journal. The fund will be called All Weather Major Markets.

On this occasion, we got to thinking about other funds that employed passive strategic asset allocation to balance risks in an unpredictable world for the investor focused on a long term horizon.[1] That brought us to a fund we’ve long admired, the Permanent Portfolio Fund (PRPFX). According to the fund’s prospectus, PRPFX “does not attempt to anticipate short-term market activity or predict future economic events, but rather it tries to limit downside risk while providing for profit potential in any environment.”

In keeping with Bridgewater’s ethos, we won’t seek to overcomplicate things; above is a simple chart showing cumulative performance (growth of $1000, net of fees) of PRPFX and All Weather 12% through multiple economic environments and surprises since inception (Permanent Portfolio dates back further to 1982), alongside the S&P 500 to proxy the returns of an equity portfolio.[2]

Additionally, and perhaps more telling, below is a rolling (3 yr) performance chart. Both products exhibit similar performance until the Financial Crisis – though All Weather participated in more of the upside of the irrational exuberance late in the decade. In the Crisis, Permanent Portfolio’s ability to perform, preserving and growing capital, is notable. All Weather has staged a fortitudinous recovery, turning in especially impressive performance in the most recent 3 year period.

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If attention merits, we’ll provide more on performance attribution, risk and returns-based factor analysis of the two. As always, please feel free to reach out to discuss and/or inquire further.

For our previous analysis of Bridgewater Pure Alpha II, the firm’s actively-traded strategy, see here to download the paper.


[1] MPI conducts performance-based analyses and, beyond any public information, does not claim to know or insinuate what the actual strategy, positions or holdings of the funds discussed are, nor are we commenting on the quality or merits of the strategies. This analysis is purely returns-based and does not reflect actual holdings. Deviations between our analysis and the actual holdings and/or management decisions made by funds are expected and inherent in any quantitative analysis. MPI makes no warranties or guarantees as to the accuracy of this statistical analysis, nor does it take any responsibility for investment decisions made by any parties based on this analysis.

[2] Data sources are Eurekahedge and Morningstar, respectively.

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