Wednesday, July 25, 2012

Bridgewater/Dalio approach

Short description using a few excerpts from Jack Schwager’s book Hedge Fund Market Wizards:

“The flagship fund uses the relatively rare combination of a fundamentally based systematic approach. (Most hedge funds that are fundamentally based use a discretionary approach, and most hedge funds that use systematic approaches base them on technical input.)….Dalio describes his approach as “timeless and universal.” He believes an economic model should encompass multiple times and countries. Bridgewater employs a fundamentally based computer model that incorporates trading rules gleaned from both Dalio’s four decades of market observations as well as Bridgewater’s analysis of markets going back hundreds of years and spanning a broad range of developed and emerging economies….The idea that the same fundamentals would have different implications under different circumstances and environments is an essential component of Dalio’s analytical thinking. As a result, categorization is an important tool for both conceptualizing problems and finding solutions.”