NEW YORK  - The masters of the investing universe are struggling to cope with bull markets. The flagship hedge fund of Ray Dalio’s Bridgewater Associates fell nearly 5% in the first half of the year even as nearly all assets rose, according to the Financial Times. And Jack Meyer, the whiz who once managed Harvard University’s endowment, is closing his fund.

These aren’t outliers. The industry, which currently manages a near-record $3.2 trillion, has become an investing laggard. Hedge Fund Research’s composite index has risen an annualized 5% over the past three years, less than half the gain of the S&P 500 Index.

Dalio’s Pure Alpha fund is designed to take a view on macroeconomic trends, so can go long or short on almost any of the world’s major stock, bond, currency and commodity markets. Yet it missed out on the sharp rally in stocks and bonds prompted by expectations that the U.S. Federal Reserve and other central banks will cut rates. The ACWI, MSCI’s broadest global index, has gained nearly 16% so far this year while the U.S. bond market, as tracked by the Vanguard Total Bond Market Index Fund, is up 4.6%.

Meyer, meanwhile, is shuttering Convexity Capital Management after years of poor performance, Institutional Investor reported. He joins other one-time stars like Omega Advisors’ Leon Cooperman in throwing in the towel.

Bridgewater, the world’s largest hedge-fund manager with $160 billion in assets, will live to fight another day. Pure Alpha hasn’t had a losing year in the past 18, and its All-Weather strategy, which uses big bond positions to smooth returns, gained 13% in this year’s first half.

It’s tougher-going for the overall industry. For most of the past decade investors would have done better buying a cheap equity index fund and avoiding hedge-fund fees that now average 1.4% of managed assets and 17% of gains, instead of the traditional 2 and 20, according to Hedge Fund Research.

Those are likely to come under more pressure. Some investors are already walking, with more than $25 billion pulled out of hedge funds in the five months to May, according to data provider eVestment. That seems a piecemeal amount.

Dalio sees trouble ahead, warning last week that mounting debt levels would lead to conflict between capitalists and socialists, and inflationary money-printing – with only gold likely to benefit. Time to place your bets.

CONTEXT NEWS

- Bridgewater Associates’ flagship Pure Alpha fund lost 4.9% in the first six months of this year, the Financial Times reported on July 21.

- Convexity Capital Management, a hedge fund run by former Harvard Management boss Jack Meyer, is closing down and returning capital to shareholders, Institutional Investor reported on July 18.

(Editing by Antony Currie and Amanda Gomez)

© Reuters News 2019