Bridgewater is starting a $2 billion fund that uses machine learning to make decisions
Bridgewater Associates is launching a fund that uses machine learning as the primary basis for decision-making.
The car will issue nearly $2 billion to more than a dozen customers and begin trading on Monday, according to people familiar with the matter, who asked not to be identified discussing the strategy.
The hedge fund giant, led by CEO Nir Bar Dea, has told investors it relies on its proprietary technology that has been in development for more than a decade. It’s the result of a broader venture led by co-chief investment officer Greg Jensen, and the new fund will be expanded to include models developed by OpenAI, Anthropic and Perplexity, among others, the people said.
The new fund will be managed by Jensen. Westport, Connecticut-based Bridgewater has been testing the strategy since late last year with a small portion of its flagship Pure Alpha fund — about $100 million — to make sure the technology works, the people said.
Bridgewater declined to comment on the fund.
Bar Dea, 42, has been turning Bridgewater around since founder Ray Dalio stepped down in late 2022. The launch of the fund is the latest step in a transformation that has taken years and has also included a major management change. Meanwhile, the Pure Alpha fund is up 14.4% this year through June 26 after more than a decade of big gains, including a 7.6% loss in 2023, people familiar with the matter said.
Bridgewater’s assets under management are $108 billion.
The push into machine learning is “a great reflection of us taking the flag to the top of the mountain,” Bar Dea said in an interview, while declining to provide specifics about the new fund. “This is perhaps the most important and pure manifestation of the times we live in.”
It also has the potential to change the hiring strategy and workforce composition at Bridgewater to include more data scientists, said Jensen, 49, who has been thinking about how machine learning could impact hedge fund investments since 2012.
Jensen, who has worked at Bridgewater since 1996, said he then committed his own money to OpenAI’s first funding round about a decade ago, and years later wrote one of Anthropic’s first checks.
Statistician Jasjeet Sekhon, a professor at Yale University, was hired by Bridgewater as the chief scientist for the program in 2018. Early last year, the company created a division called Artificial Investment Associate Labs, or AIA.
‘Giant Leap’
“The big leap here is using machine intelligence to do alpha — that’s a leap,” Jensen said. “If this is a side hobby for the people who are usually responsible for Pure Alpha, they won’t be able to focus as much on making this giant that we are.”
Jensen, who graduated from Dartmouth College with a degree in economics and applied mathematics — and won a gold bracelet at the 2022 World Series of Poker — discussed the strategy’s limitations.
Jensen said the people at Bridgewater will help the machine learning process in a number of tasks including risk management, data acquisition and trade execution to ensure that the investment plan is complete. He said a popular question for investors was: “How do you keep the machine from going out of control?”
Examples of large languages ”have a problem with visual illusions,” he said. “They don’t know what greed is, what fear is, what a cause-and-effect relationship is.”
Tests using AIA’s systems included asking how commodity prices would be affected if Donald Trump won the November election and raised tariffs on Chinese goods. Bridgewater also tested the AIA machine learning process to calculate the impact on bond prices under the Federal Reserve’s quantitative easing process.
“You will have the intelligence to read all the newspapers in the world,” said Jensen. “Machines are better at finding patterns across time and across countries.”
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