Ray Dalio Had A Mediocre 2013 And Now Everyone Is Looking Into His AllWeather Fund | Exploring Markets

Ray Dalio Had A Mediocre 2013 And Now Everyone Is Looking Into His AllWeather Fund

Starting in late December of 2013 and going through early January of 2014, there have been many media outlets reporting on Ray Dalio and his mega hedge fund Bridgewater Associates. The focus has been on his returns, which according to several sources have been somewhat lackluster. Here are two sources that are getting everyone's attention:

NYT Dealbook: Dalio’s Bridgewater Associates Posts Lackluster Returns (http://nyti.ms/1a125l3)
"The firm’s Pure Alpha fund, with $80 billion in assets, rose 5.25 percent in 2013. But Bridgewater’s All Weather fund, with $70 billion in assets, ended the year down 3.9 percent, said a person briefed on the numbers but not authorized to discuss them." 
"The All Weather fund, which invests heavily in bonds, including Treasury inflation-protected securities, or TIPS, underperformed the Barclays Aggregate Index, a widely followed bond index, which ended the year down 2.03 percent."
Fortune: Ray Dalio's 'All-Weather' fund goes cold (http://finance.fortune.cnn.com/2014/01/09/ray-dalios-all-weather-fund-goes-cold/)
"With interest rates rising, and the expectation that they will continue to rise for a while, this appears to be the end of the run for All-Weather, along with the belief that the fund had the ability to perennially defy the market. At the New York Times’ Dealbook conference in November, I asked Dalio whether he thought it was a good idea to continue to pitch All-Weather to pension funds at at time when interest rates are likely to continue to rise. In fact, Dalio predicted that himself." 
In response to my question, though, Dalio said Bridgewater had back-tested All-Weather and found that it would have done fine in, say, the late 1970s, and other periods of rising interest rates. But here’s the flaw. In the 1970s, interest rates were much higher than they are now. So any money a fund would have lost on falling bond prices would have been more than offset by high interest rates."

As a fun reminder, this is the introduction to Ray Dalio's magnum opus, PRINCIPLES: