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GLOBALpensions

CURRENCY OVERLAY MANAGER OF THE YEAR
BRIDGEWATER ASSOCIATES
them consistently to the portfolios JUDGE’S VERDICT under management. Because investment decisions have been run through Bridgewater’s proprietary systems, there are no portfolio managers in a classic sense. Instead, Bridgewater maintains an investment committee, a team of senior investment professionals that develops the criteria drawn from cumulative ongoing research into the fundamental determinants of global market pricing. Bridgewater is proud of the stability and continuity of its investment team - its key investment professionals have been working together as a team for an average of 14 years with the shortest tenure being 10 years. Bridgewater currently manages $34bn in dedicated currency overlay accounts. Over the past three years, the assets under management in Bridgewater’s currency overlay strategy have increased by $18bn. Performance over the last three years has been impressive: currency overlay mandates with standard active management guidelines have outperformed the client benchmarks by approximately 3.5% on an annualised basis. The core of Bridgewater’s business strategy is to continue to provide superior global currency and bond management to institutional investors. Unlike most competitors, whose global currency and bond management services are peripheral to their core businesses, Bridgewater’s entire focus, and core competency, is in the management of currency overlay and global bond mandates. Success for such a specialist manager lies in adding value to clients’ portfolios. Bridgewater’s approach is a belief that long-term success in the marketplace cannot be achieved without a deep understanding of the fundamental factors driving the markets. All of the global currency and bond research used in accounts management is 100% internally driven with no use of external analytical research. Bridgewater lays great emphasis on communication with clients as it broadens clients’ understanding THE NOMINEES of the investment process and helps Bridgewater’s understanding AG BISSET & CO of the clients’ objectives. This must contribute to Bridgewater’s effectiveness as investment OVERLAY ASSET managers and result in many MANAGEMENT positive, long-term relationships.

Bill Mahoney (second left), director of global marketing, and Lionel Kaliff (second right), director of international marketing at Bridgewater Associates, with David Willetts and Scott Anderson
Bridgewater has $83bn in assets under management globally. It manages portfolios for institutional clients, including pension funds, endowments, foundations, governments, and central banks. The judges showed much appreciation of Bridgewater’s solid growth, performance and research capabilities. There three key points behind Bridgewater’s philosophy: it is fundamental, systematic, and services each client on a tailored basis. By fundamental, it believes all markets do what they do because of some connection to underlying economic fundamentals. Bridgewater’s fundamental analysis is applied on a completely systematic basis and supported by advanced risk management techniques - it quickly and efficiently assesses all relevant economic and market information and quantitatively converts this into investment decisions. Thirdly it tailors portfolios in a disciplined fashion to the specific objectives of each client. In a currency overlay strategy for any portfolio, the goal is to produce the highest possible information ratio (valued added divided by the standard deviation of the value added) of alpha returns. This means a strategy that is well diversified across various sources of value added. Bridgewater currently manages currency overlay accounts against a variety of benchmarks, including ones that are fully hedged, unhedged, partially hedged, and options hedged (for clients who want to establish a prespecified loss limit). Bridgewater’s proprietary global currency systems quantitatively assess the fundamental pressures on these markets and apply

‘I was very impressed by Bridgewater’s growth in AUM, its excess performance, research capabilities, new products, etc.’

JUDGE’S VERDICT

PARETO PARTNERS RECORD CURRENCY MANAGEMENT

‘This firm continues to impress with incisive and rigorous research that feeds into their fundamental and systematic investment process’

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November 2004 Awards Supplement