Most investors know who we are talking about: Ray Dalio. Ray Dalio is the founder of Bridgewater Associates, the biggest hedge fund in the world. Dalio is also one of the most well-known managers on Wall Street.
Dalio graduated from Harvard and started the All Weather fund in 1996. With that fund he brought a new approach to traditional asset allocation models. Instead of only looking at the spread within portfolios based on positions in certain categories, Dalio also looked at inflation expectations for example. He used that information to adjust the size of some positions and their associated risk in specific inflation and growth scenarios.
Gold As A Hedge Against Inflation
Thanks to the new approach for portfolio management, the All Weather fund became one of the most consistently profitably funds in the world of hedge funds. Over time Bridgewater grew its business to 160 billion dollars under management and at the same time Dalio’s personal net worth grew to meanwhile more than 15 billion dollars. The All Weather fund has about half of all the capital under management at Bridgewater.
What we also find so interesting about Ray Dalio is that the man is a big fan of gold. He believes that it is very suited as a hedge against inflation and, as a consequence, every portfolio should have some portion allocated to gold and gold-related investments.
The All Weather fund consists of 30% stocks, 15% medium-term bonds, 40% long-term bonds, 7.5% gold, and 7.5% commodities. That means that the All Weather fund owns about 6 billion dollars in gold. In Dalio’s opinion, some people overcomplicate things in an effort to be very precise, which sometimes causes you to miss certain key basic ingredients.
