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Bridgewater Associates is launching a fund that uses machine learning as the primary basis of its decision-making.<\/p>\n
The vehicle will debut with almost $2 billion of capital from more than a half-dozen clients and begin trading Monday, according to people familiar with the matter, who asked not to be identified discussing the strategy.\u00a0<\/p>\n
The hedge fund giant, led by Chief Executive Officer Nir Bar Dea, told investors that it\u2019s leaning on its own proprietary technology that it\u2019s been building for more than a decade. It\u2019s an outcome of a broader venture spearheaded by co-chief investment officer Greg Jensen, and the new fund will also broaden to include models developed by OpenAI, Anthropic and Perplexity, among others, the people said.<\/p>\n
The new fund will be run by Jensen. Westport, Connecticut-based Bridgewater has been testing the strategy since late last year with a small sleeve of its main Pure Alpha fund \u2014 about $100 million \u2014 to ensure the technology works, the people said.\u00a0<\/p>\n
Bridgewater declined to comment on the fund.<\/p>\n
Bar Dea, 42, has been transforming Bridgewater since founder Ray Dalio ceded control in late 2022. The fund launch is the latest step in a years-long transition that also included a major management overhaul. Meanwhile, the Pure Alpha fund has climbed 14.4% this year through June 26 after more than a decade of mostly lackluster returns, including a 7.6% loss in 2023, people familiar with the matter said.\u00a0<\/p>\n
Bridgewater\u2019s assets under management are $108 billion.<\/p>\n
The push into machine learning is a \u201cgood manifestation of us taking the flag and putting it at the top of the mountain,\u201d Bar Dea said in an interview, while declining to provide specifics about the new fund. \u201cThis is maybe the most significant and pure manifestation of the moment we\u2019re in.\u201d<\/p>\n
It also has the potential to change the hiring strategy and composition of staff at Bridgewater to include more data scientists, said Jensen, 49, who has been thinking about how machine learning could impact the hedge fund\u2019s investing since 2012.\u00a0<\/p>\n
Jensen, who has worked at Bridgewater since 1996, said he then committed his own money toward OpenAI\u2019s first funding round almost a decade ago, and years later he wrote one of the first checks for Anthropic.<\/p>\n
Statistician\u00a0Jasjeet Sekhon<\/a>, a professor at Yale University, was hired by Bridgewater as a chief scientist for the initiative in 2018. Early last year, the firm formed a division called Artificial Investment Associate Labs, or AIA.\u00a0<\/p>\n \u201cThe big jump here is using machine intelligence to generate the alpha \u2014 that is a leap,\u201d Jensen said. \u201cIf this is a side hobby of people who normally have the responsibility of Pure Alpha, they wouldn\u2019t be able to have the focus necessary to make this giant leap that we\u2019re making.\u201d\u00a0<\/p>\n Jensen, who graduated from Dartmouth College with a degree in economics and applied mathematics \u2014 and won a gold bracelet at the 2022 World Series of Poker \u2014 discussed the strategy\u2019s limitations.\u00a0<\/p>\n Jensen said Bridgewater\u2019s humans will aid the machine-learning process for a number of functions including risk management, data acquisition and trade execution to ensure the investing process is a complete one. He said a popular question from investors has been: \u201cHow do you prevent the machine from getting out of control?\u201c<\/p>\n Large language models \u201chave the problem of hallucination,\u201d he said. \u201cThey don\u2019t know what greed is, what fear is, what the likely cause-and-effect relationships are.\u201d<\/p>\n Tests using the AIA systems included asking how asset prices would be affected if Donald Trump wins the November election and raises tariffs on Chinese goods. Bridgewater has also tried the AIA machine learning process to calculate the impact on bond prices under the Federal Reserve\u2019s quantitative tightening process.\u00a0<\/p>\n \u201cYou\u2019re going to have intelligence that can read every newspaper in the world,\u201d Jensen said. \u201cMachines are better at finding patterns across times and across countries.\u201d<\/p>\n<\/div>\n\u2018Giant Leap\u2019<\/h3>\n
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