Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view.
Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world's biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Prince describes those economies—the US and Europe, in particular—as "zombies" and said they will remain that way until they work through their mountains of debt.
"What you have is a picture of broken economic systems that are operating on life support," Prince said. "We're in a secular deleveraging that will probably take 15 to 20 years to work through and we're just four years in."
In Europe, "the debt crisis is [a] long ways from over," he said. The economic and financial morass will mean interest rates in the US and Europe will essentially be locked at zero for years.
In this bleak environment, Prince said stocks remain vulnerable to "air pockets" from shocks, such as bad news out of Europe. But for longer-term investors looking out over the next decade, he said, equities may be a good buy. There is even money to be made in US Treasurys, despite interest rates near record lows, and gold is likely to resume its climb as central banks print money to bolster their economies, Prince said.
The views of Bridgewater are keenly watched by other investors, given the firm's elevated status in the competitive world of hedge fund investing. Bridgewater's flagship Pure Alpha Strategy fund is considered one of the top funds in the world. As of the end of November, it was up 25% since the start of the year, according to people familiar with the situation. The average macro fund had lost 3.7%, according to Hedge Fund Research.
Currently, the fund is positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bond markets, Prince said.