The investment landscape for 2024 seems to be facing significant challenges, a realization that is resonating throughout the industryAmid these tribulations, foreign private equity firms quietly emerge as the unforeseen victors of this difficult season.

Recent reports from the industry reveal that Bridgewater Associates, a powerhouse in global hedge fund management, has achieved remarkable success with its onshore products in China, boasting annual returns of approximately 35% in 2024. This performance is particularly striking as it not only outperforms around 95% of its domestic competitors but also significantly surpasses returns from certain products managed by its overseas parent company.

New information suggests that Bridgewater’s assets under management in China have now crossed the significant threshold of 50 billion RMB, placing it on equal footing with prominent domestic quantitative firms like Jiukun, Minghong, and Yanfuf.

What exactly allowed this opportunity to be discovered, and how did it translate into such impressive results?

According to leading distribution channels in the industry, a product launched in late November 2021 by Bridgewater in China reported net gains of 35% in 2024 alone

As of January 3, 2025, the cumulative return for this product had soared to 57%, indicating that early investors had seen their capital appreciate by over 50% in just three yearsThis specific product is a collaboration between Bridgewater China and a domestic trust company, being sold through prominent banking distribution networksAdditional reports indicate that certain offerings from this firm have even halted the acceptance of new external investments.

Market insights further disclose that Bridgewater’s private equity assets in China increased to approximately 55 billion RMB by the end of 2024, a remarkable 40% surge compared to the previous year's total of 40 billion RMBThis growth can be attributed both to the appreciation in the net asset values of its products and a minor influx of additional capital from existing investors.

Analysts have noted that if the performance of Bridgewater China's products were evaluated as a standalone entity, it would rank among the top ten hedge fund products globally

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In essence, Bridgewater's foray into the Chinese private equity market has resulted in not just enhanced visibility but substantial financial gains, successfully marrying reputation and profit.

However, the precise allocation of its investments remains a topic of intrigueDue to the limited disclosures typical of hedge funds, obtaining specific details about Bridgewater’s Chinese products, including their portfolios and sources of income, proves challengingNonetheless, some clues have emerged.

For instance, in past presentations, Bridgewater had indicated that its domestic offerings exclusively target Chinese assets, distinctly different from the focus of its overseas parent firm's productsWhen reviewing the performance of major asset indices in the Chinese market throughout 2024, it becomes apparent:

• In the equity market, the Shanghai Composite Index, Hang Seng Index, and ChiNext Index grew by 14.68%, 17.67%, and 13.23%, respectively.
• In the commodity market, the South China Agricultural University Commodity Index saw a decline of 1.26%.
• In the bond market, the CSI Aggregate Bond Index reported a growth of 8.83%.

This data underscores that the most lucrative categories of onshore assets over the past year were Chinese equities and bonds

If Bridgewater aimed to capitalize on market opportunities, it most likely did so in these two asset types, given the subdued performance of the commodity market.

Other channels have also provided insightsAccording to data acquired from a Bridgewater roadshow in July 2024, the correlation of its multi-asset strategy with the CSI 300 Index was found to be stronger than with the CSI 500 and ChiNext indicesThis calculation is based on the operational effectiveness of the first product, which was issued in China back in October 2018. Correlation analysis revealed that Bridgewater China's products tend to align closely with actively managed mixed and equity funds, hinting that their income sources could largely stem from equity investments.

Earlier on, Bridgewater had revealed its investment philosophy, stating that its equity positions did not extend to individual stocks or sector-based ETFs

Instead, trades were executed based on a basket of stock indices, including the CSI 300, CSI 500, and various Chinese concept stock indices, which were combined in specific proportionsHowever, this strategy could have evolved since its inception.

Given the nuances in net asset value changes, we can infer more about Bridgewater's strategiesFor example, on September 20, the net asset value stood at 1.2731, and by September 27, it jumped to 1.3011, reflecting a moderate weekly increase of 2.2%. While this may seem unremarkable, by September 30, the net asset value spiked to 1.5125, marking a staggering increase of 19% since September 20. This period coincided with a surprising rally in the A-share market, suggesting that Bridgewater’s product had a strong affinity with equity market movements.

Another time dimension offers cross-verification: in January 2024, the market underwent significant quantitative turmoil

From January 24 to the following week, the product's net value dropped from 1.1636 to 1.1212, a weekly decline of 3.6%. However, by the end of March, the net value had gradually recovered, reflecting parallels with trends in the equity market at that timeViewed from this angle, Bridgewater's equity exposure during this turbulent phase appeared relatively modest.

Delving further back to 2023, records indicate that Bridgewater achieved absolute returns for the fiscal year, with earnings stemming largely from bonds and commoditiesThis flexibility in asset allocation hints at a dynamic approach in response to market conditions.

For onshore hedge funds and quant investors, safeguarding investment strategies has always been paramountThis reality complicates external efforts to unearth the strategies employed by foreign entities like BridgewaterRegardless, Bridgewater China's relative success illustrates a fascinating possibility: within the currently underdeveloped asset space in China, there remain significant opportunities to weave together robust defensive and offensive strategies.

This conclusion is supported by the prevailing evidence.