Bridgewater Associates, LP is the largest hedge fund in the world; it has $88 billion under management.
Last night, this firm told the Stamford Chartered Financial Analysts' (CFA) Society that asset allocation is the key to managing risk. Bridgewater's method requires leveraging the 10-year treasury note 2:1 in order to match the volatility of equities.
Bridgewater implemented this strategy about five years ago, and it probably served their clients well during the crisis. One attendee wondered how that leveraged position in fixed income will serve them in the next five years...
3 comments:
Funny, I was lead to understand that leverage is risk, or at least it's force multiplier for the riskiness of your portfolio.
The funds strategy will continue to work as long as the fed keeps up their debt purchases:
9/30 $2.2B
10/5 $5.19B
10/6 $2.069B
10/15 $4.69B
10/18 $6.26B
10/20 $660M of tips
But what happens when the Fed starts to unwind this thing? It can't happen fast. It seems we are in the Japan trap unless the FOMC have learned something from the Japanese.
I caught some grief about deflation last year in this blog's comments, but it's clear, we will see continuing inflation and not deflation. I was just early.
4.5 Year TIPS Auction Closes At -0.55%, First Ever Negative Yield
From zero Hedge "As we reported some time ago, the weird stuff in TIPS land continues, and was brought to the surface during today's [10/25/2010] 4 Year 6 Month TIPS auction, which closed at, drumroll, -0.55%. That's right, a yield of negative 0.55%. This compares to +0.55% in April.
This is nuts! The "deflationists" are wrong!
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