Russian invasion of Ukraine could have ‘significant’ impact on market, Bridgewater’s Dalio warns

The founder of the world’s largest hedge fund has followed the Russian invasion of Ukraine closely, and his concerns are likely shared by many of his counterparts in Connecticut’s investment community.

Westport-based Bridgewater Associates founder and co-chief investment officer Ray Dalio’s commentary on the war suggests many investors are looking at the impact of sanctions on Russia and other economic repercussions of the war. ‘invasion. But how the fallout from the conflict will affect investment firms such as Bridgewater will depend heavily on their respective strategies.

“The sanctions that have been announced so far have been designed to minimize economic damage to Europe and (to) the United States and not to hit Russia hard enough to provoke major retaliation – for example, they do not have not yet curbed Russian energy exports or cut off Russia’s access to the SWIFT Network. In other words, so far economic warfare has not been very costly for NATO countries,” wrote Dalio in a post on LinkedIn, “If these are the only answers, they will not have a significant effect on the markets and Russia will probably end up taking control of Ukraine by paying the price of rather painful sanctions .”

“At the NATO/Russia level, this war will look more like a negotiated swap than an out-of-control war, so it won’t disrupt much beyond Ukraine and Russia,” Dalio added. He noted, however, that “the further the war spreads beyond these borders, the greater its impacts will be on other things, including markets.”

Dalio did not comment in the post on how he thought Bridgewater’s assets under management, whose total ranks first among hedge funds, would be affected by the markets’ response to the war. Bridgewater manages approximately $150 billion in assets for institutional investors, including public and corporate pension funds, university endowments, charitable foundations, foreign governments and central banks.

A message left for a Bridgewater spokesman inquiring about the firm’s investment strategy in response to war-related developments such as the sanctions was not immediately returned.

Of other Connecticut-based investment firms contacted by Hearst Connecticut Media, Greenwich-based AQR Capital declined to comment, while Stamford’s Point72 did not immediately return a message.

Investment firms’ positions related to oil and gas holdings and foreign exchange markets could produce significant gains, according to some experts, depending on how they anticipate the economic impact of the war.

“Increased uncertainty, variability and fluctuations can benefit a hedge fund, which is able to predict and anticipate. They don’t make money in stable markets because there’s not much to look forward to,” Lawrence J. White, an economics professor at New York University, said in an interview. “I can imagine a hedge fund saying, ‘I hate all the human cost and the hustle and bustle, but this is an environment where I can make money. “”

Having dealt with the disruption of the COVID-19 pandemic and many other global crises in previous years, investment firms are used to turbulent markets.

Last year, the world’s 20 best-performing hedge funds set a record by earning more than $65 billion for their clients, Reuters reported in January. Bridgewater rebounded from losses in 2020 by posting a gain of $5.7 billion in 2021, according to data cited by Reuters.

At the same time, some financial services advocates said they have more pressing concerns about the war than returns on investment.

“I am concerned about the situation in Ukraine from a humanitarian perspective and from the perspective that dangerous authoritarian regimes should not be allowed to intimidate and invade their neighbours, especially peaceful democracies,” Bruce McGuire said. , president of the Connecticut Hedge Fund Association. “Am I worried about hedge funds – no, not really.”

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