Bridgewater teams up with State Street on 'All Weather' ETF launch

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 Tuesday regulatory filing. 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 into ETFs, which have burgeoned into a $14 trillion global market thanks to the 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 allocates to different assets based on their volatility. The idea is that rather than pile on a risky asset like stocks to chase big returns, the portfolio can achieve similar results with less risk by diversifying across the likes of bonds and commodities and levering up the safer investments. Bridgewater’s iteration of the approach emphasizes holding a balance of assets that will weather the ups and downs of a business cycle.

“We believe a diversified asset allocation is a great step in preparing for the future, and we are excited to broaden access to our approach with an innovative organization like State Street Global Advisors,” Karen Karniol-Tambour, co-chief investment officer of Bridgewater 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 trailed the S&P 500 Index. When inflation and Federal Reserve interest-rate hikes battered stocks and bonds in 2022, risk parity suffered  as well, thanks to its typically higher debt allocation. Wealthfront Inc. said this month it will close its $1.3 billion risk-parity fund, and pensions have also been cutting allocations.

An S&P risk-parity index that targets 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.

The fund’s fees and tickers 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 day-to-day management of the fund. 

“The interesting part is State Street is using a model delivery rather than having Bridgewater directly manage 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 pushback will be that Bridgewater does not have direct hands on it, but I guess this is as close folks can get for now.”

State Street is the world’s third-largest ETF issuer, with roughly $1.4 trillion under management, data compiled by Bloomberg show. The firm also filed in September to join forces with Apollo Global Management Inc. on a private credit ETF filing.