(Bloomberg) — Bridgewater Associates founder Ray Dalio's All Weather strategy is coming to the exchange-traded fund market.
State Street Global Advisors plans to create the SPDR Bridgewater All Weather ETF, according to a regulatory filing Tuesday. The fund will be sub-advised by Bridgewater, which will provide a daily model portfolio specific to this product.
The move marks the latest example of a hedge fund extending to ETFswhich have spread into a $14 trillion global market thanks to ease of trading, tax benefits and generally lower fees.
First launched in 1996 to manage Dalio's trust assets, All Weather is a so-called risk parity strategy that spreads across different assets based on their volatility. The idea is that instead of piling into a risky asset like stocks to chase big returns, the portfolio can achieve similar results with less risk by diversifying between bonds and commodities and increasing safer investments. Bridgewater's iteration of the approach emphasizes maintaining a balance of assets that will weather the ups and downs of a business cycle.
“We believe that a diversified asset allocation is a big step in preparing for the future, and we are excited to expand access to our approach with an innovative organization like State Street Global Advisors,” Karen Karniol-Tambour, co- Bridgewater's chief investment officer. Associates, said in a press release Tuesday announcing that the firms entered into a “strategic relationship” to expand alternative asset investing.
Investor interest in such diversified strategies has waned in recent years as they have tracked the S&P 500 Index. When inflation and Federal Reserve interest rate hikes hit stocks and bonds in 2022, risk parity suffered as well, thanks to the split its usually higher debt. Wealthfront Inc. said this month it will close its $1.3 billion risk-equity fund, and pensions have also cut allocations.
An S&P risk parity index targeting 12% volatility is up 3% this year, compared with 11% for a Bloomberg index that puts 60% in stocks and 40% in bonds. The S&P 500 is up about 24% through Monday's close.
Fees and fund indicators are not yet listed. Bridgewater's Karniol-Tambour and Christopher Ward are responsible for creating the model portfolio, while a team led by SSGA's James Kramer will handle the day-to-day management of the fund.
“The interesting part is that State Street is using a model distribution instead of Bridgewater directly managing the fund — still, that's more access than 95% of investors have had before,” said Todd Sohn, an ETF strategist at Strategas. “I wonder if the offense will be that Bridgewater doesn't have direct hands on it, but I think that's as close as it gets for people right now.”
State Street is the world's third-largest ETF issuer, with roughly $1.4 trillion under management, data compiled by Bloomberg show. Firm too deposited in September to join forces with Apollo Global Management Inc. in a private credit submission to the ETF.