56
One Glendinning Place Westport, CT 06880 (203) 226-3030 www.bwater.com May 28, 2009
One Glendinning PlaceWestport, CT 06880
(203) 226-3030www.bwater.com
May 28, 2009
- 1 -
AGENDA
I. All Weather Investment Review
II. Bridgewater Update
- 2 -
I. All Weather Investment Review
- 3 -
BACKGROUND + TIMELINE
“Timeless and Universal”
All Weather is based on principles that yield the best asset allocation over time.
It was tested in all periods and countries, including in other depressions.
Depressions are the bone-jarring economic hurricanes that come along once or twice a century, so we studied them thoroughly.
9 years ago we converted that understanding into a depression gauge.
By 4Q08, depression signals were acute enough that we decided toshift to All Weather ex-credit (i.e., the Safe Portfolio).
In 2Q09, aggressive Fed intervention offsets private sector credit contraction, easing many depression gauge indicators.
- 4 -
-100%
100%
300%
500%
700%
900%
1100%
1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
All Weather 10% USD Cumulative Total Return (ln)
All WeatherConventional PortfolioEquities
Total Returns
Cash ReturnsAnnualized Returns
Excess Returns
11.4%8.7%9.6%
4.0%4.0%4.0%
7.4%4.7%5.7%
All Weather Simulated Returns
All Weather Actual Returns
Through April - 2009
HISTORICAL PERFORMANCE
Data shown is gross of fees total return. Past results are not necessarily indicative of future results. WHERE SHOWN, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Source: Global Financial Data Inc. and Bridgewater Analysis.
- 5 -
-20%
0%
20%
40%
60%
80%
100%
120%
140%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
All Weather 10% USD Cumulative Total Return (Gross of Fees, ln)
All WeatherConventional PortfolioEquities
Total Returns
Cash Returns
Annualized Returns
8.1%4.9%3.8%
3.8%3.8%3.8%
Excess Returns
4.4%1.1%0.0%
Lehman bankruptcy
Depression Gauge on
Through April - 2009
HISTORICAL PERFORMANCE
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Depression Gauge moderates
- 6 -
OUTLOOK SUMMARY
We are in a massive reflation. Central banks, primarily the Fed, are printing lots of money to make up for contracting credit.
We believe the Fed can produce positive nominal GDP growth by substituting money growth for credit growth. This shifts the investment risks of a depression dynamic from declining asset values (in currency terms) to a decline in the value of money, i.e. the dollar.
- 7 -
THE DIFFERENCE BETWEEN RECESSION & DEPRESSION
A recession is an economic contraction that is due to a contraction in real capital (i.e. debt and equity) arising from a tight central bank policy (usually to fight inflation), that ends when the central bank eases.
A depression is an economic contraction that is due to a contraction in real capital (i.e. credit and equity) that arisesfrom a shortage of credit worthy borrowers and/or a shortage of money to lend to them that ends when the debt/money imbalance is rectified so that economically viable capital formation can resume.
- 8 -
SECULAR CREDIT EXPANSION AND CONTRACTION
-5%
0%
5%
10%
15%
20%
25%
19 27 35 43 51 59 67 75 83 91 99 07
USA 3m Interest Rate USA 30yr Bond Yield
100%
150%
200%
250%
300%
350%
19 27 35 43 51 59 67 75 83 91 99 07
USA Total Debt % GDP
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
19 27 35 43 51 59 67 75 83 91 99 07
USA Risk Premiums (Avg Eq & Corps)
60 Year Credit Expansion
20%
40%
60%
80%
100%
120%
140%
17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97 02 07
0%
2%
4%6%
8%
10%
12%
14%16%
18%
20%
Household Debt / Disposable Income
Household Interest Payments / Disposable Income
- 9 -
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
54 58 62 66 70 74 78 82 86 90 94 98 02 06 10
Fed Funds Target Rate Beginning of Easing Beginning of Tightening
INTEREST RATE CYCLES: APPROACHING 0%
Average Change in Target Rate
Minimum Change in Target Rate
Max Change in Target Rate
Average Duration (Months)
Tightening Cycle 5.1% 2.9% 11.8% 39
Easing Cycle -5.1% -2.3% -11.0% 20
~5.25%
- 10 -
LACK OF RESPONSE
-10%
-5%
0%
5%
10%
15%
-36 -28 -20 -12 -4 4 12 20 28 36 44 52 60
Typical Cycle This Cycle 1 StDev
Real Retail Sales (YoY)
-20%
-15%
-10%
-5%
0%
5%
10%
15%
-36 -28 -20 -12 -4 4 12 20 28 36 44 52 60
Typical Cycle This Cycle 1 StDev
Real Home Price Inflation (Home Prices YoY - CPI YoY)
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
-36 -28 -20 -12 -4 4 12 20 28 36 44 52 60
Typical Cycle This Cycle 1 StDev
S&P 500 (ln)
20
40
60
80
100
120
140
160
-36 -28 -20 -12 -4 4 12 20 28 36 44 52 60
Typical Cycle This Cycle 1 StDev
Consumer Confidence (Conf Board)
`
- 11 -
-4%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
USA RGDP Y/Y USA Finance-based Growth Estimate Latest Reading
ESTIMATED GDP GROWTH IS STILL WEAK
- 12 -
MASSIVE PRODUCTION OF MONEY
0%
5%
10%
15%
20%
25%
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
M0 (Monetary Base) %GDP
All at once
Source: Global Financial Data Inc. and Bridgewater Analysis.
More Slowly
- 13 -
MONEY CREATION OFFSETTING CREDIT CONTRACTION
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
M0 (Monetary Base) 6mo Change (ann.) %GDP USD Debt 6mo Change (ann.) %GDP
10%
15%
20%
25%
30%
35%
40%
45%
50%
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
M0 (Monetary Base) + Outstanding USD Debt, 6mo Change (ann.) %GDP
- 14 -
HUGE DEBT BEING MONETIZED
100%
150%
200%
250%
300%
350%
400%
450%
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
USD Debt %GDP
-20%
-10%
0%
10%
20%
30%
40%
50%
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
M0 (Monetary Base) 6mo Change (ann.) %GDP USD Debt 6mo Change (ann.) %GDP
Source: Global Financial Data Inc. and Bridgewater Analysis.
- 15 -
0%
10%
20%
30%
40%
50%
60%
70%
USA GBR JPN CHE EUR CAN EM_Asia EM_Eur AUS Lat_Am
Total Government Interventions (% of GDP)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
USA GBR JPN CHE EUR CAN EM_Asia EM_Eur AUS Lat_Am
Fiscal Stimulus Asset Guarantees (% GDP) Asset Purchases (% GDP) Capital Injection (% GDP)
GLOBAL GOVERNMENT INTERVENTIONS
- 16 -
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
Wld EMD Spread (JPMorgan EMBI Plus)
Still high, but less
0%
5%
10%
15%
20%
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
CDX HY
Still high, but less
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
CDX IG
Still high, but less
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 100%
5%
10%
15%
20%
25%
30%
USA BAA Option Adjusted Corp. SpreadUSA CAA Option Adjusted Corp. Spread
Still very high
Source: Global Financial Data Inc. and Bridgewater Analysis.
CREDIT SPREADS HAVE IMPROVED SLIGHTLY BUT REMAIN HIGH...
- 17 -
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Total Non-Fin Business Credit Market Borrow ing %PGDP
. . . AND NEW BORROWING IS WEAK
- 18 -
-4%-3%-2%-1%0%1%2%3%4%5%6%
85 87 89 91 93 95 97 99 01 03 05 07 09
Weekly Overall Growth Estimate 52 week ChangeReal GDP Growth Y/Y Change
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
85 87 89 91 93 95 97 99 01 03 05 07 09
Overall Growth Estimate Relative to 5 yr Trend
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
99 00 01 02 03 04 05 06 07 08 09
Weekly Overall 4 Week Growth Estimate (AR)
? ?
?
?
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
85 87 89 91 93 95 97 99 01 03 05 07 09
Weekly Overall Growth Estimate Q/Q ChangeReal GDP Growth Q/Q Change
THE ECONOMY HAS PLUNGED AND PAUSED
- 19 -
S&P 500 Price (Indexed to Peak)
0.0
0.2
0.4
0.6
0.8
1.0
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1915-1945 Price 1992-present Price
S&P 500 EPS (Indexed to Peak)
0.0
0.2
0.4
0.6
0.8
1.0
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1915-1945 EPS 1992-present EPS
S&P 500 EPS (Level Forecast Following Great Depression)
0
10
20
30
40
50
60
70
80
90
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
S&P 500 EPS EPS Level (Follow ing Great Depression)
S&P 500 P/E Ratio (Indexed to Peak)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1915-1945 P/E (actual earnings) 1915-1945 P/E (trend earnings)
1992-present P/E (actual earnings) 1992-present P/E (trend earnings)
Current P/E: 54
STOCKS ARE DISCOUNTING RECESSION RATHER THAN DEPRESSION
- 20 -
0
50
100
150
200
250
300
350
400
Mar-29
Sep-29
Mar-30
Sep-30
Mar-31
Sep-31
Mar-32
Sep-32
Mar-33
Sep-33
Mar-34
Sep-34
Dow Jones Price Index
-48%
48%
-28%
16%
-36%
23%
-37%
29%
-45%
35%
-39%
21%
-16%
24%
-43%
94%
-37%
117%
-19%
20%
-21%
32%
-22%
RECENT S&P MARKET ACTION IN PERSPECTIVE
0
200
400
600
800
1,000
1,200
1,400
1,600
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
S&P 500 Stock Index
28%
-19%
12%
-47%
-24%
30%
3
4
5
6
7
8
9
10
00 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05
Daily Dow Jones Industrial Average (ln) 50 Biggest 'Up' Days
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jun-89
Dec-89
Jun-90
Dec-90
Jun-91
Dec-91
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Nikkei Stock Index
34%
-28%
19%
-39%34%
-21%
17%
-43%
32%
-16%
32%
-24%
34%
-28%
- 21 -
US Short Rates (Level Forecast Following Japan History)
0%
1%
2%
3%
4%
5%
6%
7%
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
Short Rate Level Short Rate (Following Japan Bubble)
US Short Rates (Level Forecast Following Great Depression)
0%
1%
2%
3%
4%
5%
6%
7%
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
Short Rate Level Short Rate (Following Great Depression)
US Bond Yields (Level Forecast Following Japan History)
0%1%2%3%4%5%6%7%8%9%
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
Bond Yield Bond Yield (Following Japan Bubble)
US Bond Yield (Level Forecast Following Great Depression)
0%1%2%3%4%5%6%7%8%9%
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
Bond Yield Bond Yield (Following Great Depression)
INTEREST RATES MAY REMAIN LOW FOR AN EXTENDED PERIOD
Source: Global Financial Data Inc. and Bridgewater analysis
- 22 -
-8%
-6%
-4%
-2%
0%
2%
4%
6%
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%US Current Account Balance % GDP Real Trade Weighted US$ Substitute Adjusted Real TWI US$
Financing Hurdle
Dollar Debt Squeeze
-15%
-10%
-5%
0%
5%
10%
15%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Pay Dow n of Global Borrow ing of USD by Non-USAEntities (annlzd, % NGDP)
Capital Repatriation (%PGDP, 3mma)
-4%
-2%
0%
2%
4%
6%
8%
77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Foreign Purchases of US Debt (Ex-Treasuries)
US Purchases of Foreign Assets
DOLLAR DYNAMICS
- 23 -
Performance Review
- 24 -
Size: $ 75 million
Objective:
Approach:
Generate consistent returns over time through a balancedrisk allocation
ALL WEATHER MANDATE SUMMARY
Leverage and de-leverage assets to a common level of risk
Balance exposure to economic environments by neutralizing the structural biases of assets
- 25 -
MANAGING MONEY IN DEPRESSIONS
Safe PortfolioStrategy:
Collapse in equity and credit markets. Ability to diversify andbalance risk with respect to growth is inhibited. Extreme uncertainty regarding inflation and deflation.
Market Conditions:
Given stimulation and interest rate declines; Lack of credit response, lack of demand response, lack of market response, interest rates near 0%.
Depression Gauge:
A self-correcting economic contraction where economic expansion is enabled by credit expansion.
Recession:
A self-reinforcing credit contraction that produces severe economic declines and extreme inflation/deflation outcomes.
Depression:
- 26 -
THE SAFE PORTFOLIO
Safe PortfolioCapital Allocation
Please refer to Note 1 for relevant disclosures
IL Bonds (40%)
T-Bonds (20%)
Gold (10%)Base Currency Hedged
T-Bills (30%)
40% Global Inflation-Linked Bonds (Hedged)Accrues actual inflation (plus real yield)Risk of deflation is mitigated by deflation protection feature
30% Global Government Bills (Hedged)Small positive real return in deflationSmall negative real return in inflation
20% Global Government Bonds (Hedged)Positive real return in deflationNegative real return in inflation
10% Gold (Denominated in base currency)Positive return in rising inflationNegative return in deflationProtects against paper currency problems
- 27 -
ASSETS AND PORTFOLIOS IN THE GREAT DEPRESSION
Gray shaded region indicates peak-to-trough period in All Weather’s performance. Data shown is gross of fees total return. WHERE SHOWN, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Source: Global Financial Data Inc. and Bridgewater Analysis.
Cumulative Nominal Total Return
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
1929 1930 1931 1932 1933
Gold price T-Bills T-Bond IL Bond S&P 500 Commodities
Cumulative Nominal Total Return
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
1929 1930 1931 1932 1933
All Weather Safe Portfolio Conventional Portfolio (65% stocks / 35% bonds)
- 28 -
RETURNS SINCE JULY 2007
Data shown is gross of fees total return. Past results are not necessarily indicative of future results. WHERE SHOWN, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
Cumulative Total Return July 2007 - May 7, 2009
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09-40%
-30%
-20%
-10%
0%
10%
20%
30%Actual All Weather Strategy Standard All Weather USA Conventional Portfolio
Cumulative Total ReturnJul. 2007 -
May 7, 2009Nov. 2008 -
May 7, 2009
Actual Strategy (Safe Portfolio since Nov. 08) (8.5%) 7.9%
Standard All Weather (2.2%) 16.8%
Conventional Portfolio (28.9%) (4.9%)
- 29 -
SAFE PORTFOLIO VS. STANDARD ALL WEATHER SINCE NOV 08November 2008 - May 7, 2009 Gross Excess Return:
Standard All Weather
16.6%
-5%
0%
5%
10%
15%
20%
25%
Nominals ILs Equities Commodities EMD Corporates Total
Data shown is gross of fees total return. WHERE SHOWN, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
November 2008 - May 7, 2009 Gross Excess Return:Target Safe Portfolio
8.2%
-10%
-5%
0%
5%
10%
15%
20%
25%
Nominals ILs Equities Gold EMD Corporates Total
- 30 -
All Weather Portfolio Trading LLCGross of Fees Performance Summary Table
PERFORMANCE SUMMARY
Note: Performance is estimated through April 30, 2009.
Inception of the mandate was December 2007.
First and last time periods referenced in the above performance table may be partial depending on the inception date of the account or investment as well as the date through which performance is estimated.
Note: PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
TotalReturn -
Return on Cash =
Excess Return
4Q2007 - 0.57 % 0.32 % - 0.89 %1Q2008 4.17 % 0.62 % 3.55 %2Q2008 - 0.67 % 0.50 % - 1.17 %3Q2008 - 9.42 % 0.45 % - 9.87 %4Q2008 - 14.36 % 0.06 % - 14.42 %1Q2009 1.53 % 0.04 % 1.49 %2Q2009 - 0.74 % 0.01 % - 0.75 %
Inception - 19.57 % 2.02 % - 21.59 %Annual Return - 14.25 % 1.42 % - 15.67 %
- 31 -
LONG-TERM PERFORMANCE VS. EXPECTATIONS
The dotted line above delineates between the long-term performance for the strategy referenced and the performance of your specific account or investment.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Bridgewater All Weather Strategy Gross Cumulative Excess Return vs. Expectations (ln)
-50%
0%
50%
100%
150%
200%
May
-96
Nov
-96
May
-97
Nov
-97
May
-98
Nov
-98
May
-99
Nov
-99
May
-00
Nov
-00
May
-01
Nov
-01
May
-02
Nov
-02
May
-03
Nov
-03
May
-04
Nov
-04
May
-05
Nov
-05
May
-06
Nov
-06
May
-07
Nov
-07
May
-08
Nov
-08
May
-09
Nov
-09
May
-10
Nov
-10
Expected Return 1 Standard Deviation 2 Standard Deviation Cumulative Excess Return
Bridgewater All Weather Strategy
All Weather Portfolio Trading LLC
Jun-96 to Nov-07 Dec-07 to Apr-09
Expected Annual: Excess Return = 6.5%StDev = 10.0%
Expected Annual: Excess Return = 6.5%StDev = 10.0%
Actual Annual: Excess Return = 7.2%StDev = 9.9%
Actual Annual: Excess Return = -15.7%StDev = 20.0%
Inception of All Weather Portfolio Trading LLC investment
December 2007
- 32 -
Note: PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE ATTRIBUTION
All Weather Portfolio Trading LLC : Dec 2007 - Apr 2009Gross Excess Return Attribution
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
AW Nominal Bonds AW Commodities AW EMD AW IL Bonds AW Corporates AW Equities Excess Return
All Weather Portfolio Trading LLC : Dec 2007 - Apr 2009Gross Total Return Attribution
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
AW Nominal Bonds AW Commodities AW EMD AW IL Bonds AW Corporates AW Equities Total Return
- 33 -
Note: CONFIDENTIAL AND PROPRIETARY. This report is not intended for redistribution.
All Weather Portfolio Trading LLCExposure Report
May 15, 2009
Exposureas a % of
Portfolio ValueNominal Interest Rate FuturesAusBond 4.2%Euroland Bond 27.1%JGB 13.5%UK Gilt 7.2%US Bond 33.3%Total Nominals 85.3%
Corporate BondsCorporate Bonds 0.0%Total Corporate Bonds 0.0%
Inflation-Linked BondsEuroland 15.5%United Kingdom 8.0%United States 18.3%Total Inflation-Linked Bonds 41.8%
Emerging MarketsArgentina 0.0%Brazil 0.0%Bulgaria 0.0%Malaysia 0.0%Mexico 0.0%Peru 0.0%Philippines 0.0%Poland 0.0%Russia 0.0%South Africa 0.0%Turkey 0.0%Venezuela 0.0%Total Emerging Markets 0.0%
Treasury HedgesUS Treasury Hedge to Corporate Spread 0.0%US Treasury Hedge to EMD Spread 0.0%Total Treasury Hedges 0.0%
Exposureas a % of
Portfolio ValueEquitiesAustralia 0.0%Canada 0.0%France 0.6%Germany 3.3%Hong Kong 1.0%Italy 0.0%Japan 1.5%United Kingdom 1.2%United States 5.0%Total Equities 12.6%
CommoditiesAluminum 0.3%Copper 0.4%Corn 0.1%Crude Oil 0.9%Gold 10.0%Live Cattle 0.0%Natural Gas 0.1%Soybeans 0.1%Total Commodities 11.9%
- 34 -
II. Bridgewater Update
- 35 -
Founded 34 years ago
Managing Pure Alpha accounts for 17 years
No changes in key investment personnel
Timeless and universal perspective
Focused solely on Institutional clients
Note: Asset breakdown shown is by benchmark asset class and includes both the benchmark and alpha strategy.
BRIDGEWATER UPDATE
Figures estimated as of 04/09
Manage approximately $71 billion in assets
AUM by Asset Class – $28 bln in Absolute Return – $11 bln in Global Fixed Income – $8 bln in Multi Asset Class and FX – $7 bln in Global Inflation Indexed Bonds – $1 bln in Equities – $18 bln in All Weather Strategy
- 36 -
Outlook Appendix
- 37 -
DOLLAR DEBT BUBBLE WAS GLOBAL
$0
$500
$1,000
$1,500
$2,000
$2,500
73 77 81 85 89 93 97 01 05 09
World Central Bank Purchases of USD-Denominated Assets (3-Year Change)
Non-US Borrowing of USD Amount Outstanding (Y-Y as % of USA Potential GDP)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Global Developed World Emerging World
- 38 -
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Global Industrial Production Drawdown
0%
2%
4%
6%
8%
10%
12%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Developed World (ex-US) Short Rates
THE DEPRESSION IS GLOBAL IN SCOPE
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
EM Growth Developed Growth
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
World Exports Drawdown
- 39 -
SAVINGS RATE HAS IMPROVED, BUT IS STILL LOW
-2%
0%
2%
4%
6%
8%
10%
12%
14%
60 64 68 72 76 80 84 88 92 96 00 04 08100%
200%
300%
400%
500%
600%
700%
US Personal Savings RateUS Household Net Worth % Disposable Income
Developed World Personal Savings Rate (GDP Weighted, 3mma)
4%
6%
8%
10%
12%
14%
16%
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
-36 -33 -30 -27 -24 -21 -18 -15 -12 -9 -6 -3 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60
Typical Cycle 1 StDev This Cycle (Sep-07)US Personal Savings Rate
- 40 -
STOCKS ARE DISCOUNTING RECESSION RATHER THAN DEPRESSIONPrice (Indexed to Peak in EPS)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1975-2005 Japan Price 1992-2023 S&P 500 Price
EPS (Indexed to Peak in EPS)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1975-2005 Japan MSCI 1992-2023 S&P 500 EPS
S&P 500 EPS (Level Forecast Following Japan History)
-40
-20
0
20
40
60
80
100
120
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
S&P 500 EPS EPS Level (Follow ing Japan Bubble)
P/E Ratios (Indexed to Peak in EPS)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15
1975-2005 Japan P/E (actual earnings) 1975-2005 Japan P/E (trend earnings)
1992-2023 S&P 500 P/E (actual earnings) 1992-2023 S&P 500 P/E (trend earnings)
Source: Global Financial Data Inc. and Bridgewater Analysis.
- 41 -
Account Review Appendix
- 42 -
ALL WEATHER MANDATE SUMMARY
All Weather mixRisk Impact by Asset Class
Portfolio Expectations
Total Return:Risk:
Sharpe Ratio:Leverage:
8.5%10.0%0.652:1 to 3:1
Portfolio Expectations
Total Return:Risk:
Sharpe Ratio:Leverage:
4.0%5.0%0.400.7:1
Safe Portfolio mixRisk Impact by Asset Class
Inflation-Linked Bonds
Corporate Spreads
EM Debt Spreads
CommoditiesNominal Bonds
Equities
Nominal Bonds
Gold
Inflation-Linked Bonds
The example does not necessarily indicate the actual historical or current implementation of Bridgewater’s strategies. Markets listed may or may not be currently traded and list is subject to change without notice. Expectations are based on Bridgewater Associates’ understanding of global markets. There is no guarantee that the results shown can or will be achieved.
- 43 -
PERFORMANCE OF SAFE PORTFOLIO IN DEPRESSIONS
Data shown is gross of fees total return. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.Source: Global Financial Data Inc. and Bridgewater Analysis.
Safe Portfolio
-80%
-60%
-40%
-20%
0%
20%
1929 1930 1931 1932 1933
Nominal Return Real Return
7.6%
-7.7%
Japan Safe Portfolio
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
1/1989 7/1989 1/1990 7/1990 1/1991 7/1991
Nominal Return Real Return
-3.2%
-5.9%
- 44 -
Disclosures
Please read the following notes and disclosures as they provide important information and context for the research and performance presented herein. Additional information is available upon request except where the proprietary nature of the information precludes its dissemination.
- 45 -
NOTESNote 1 : For illustrative purposes only. The example does not necessarily indicate the actual historical or current implementation of Bridgewater’s strategies. Markets listed may or may not be currently traded and list is subject to change without notice.
- 46 -
Note: All performance tables and charts shown in the Account Review section of this presentation are based upon the returns of the account or investment referenced, as managed by Bridgewater. Performance is estimated for the periods referenced. Any attribution is based on Bridgewater analysis. Where shown, gross of fees returns will be reduced by the investment advisory fees and any other expenses that may be incurred in the management of the account or investment. Where shown, equity values are estimated using the most current information available, and are subject to change. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ACCOUNT REVIEW DISCLOSURE
- 47 -
ALL WEATHER PORTFOLIO TRADING LLC POSITION NOTES
1. "Exposure as a % of Portfolio" represents the notional value of portfolio holdings divided by the total portfolio value.
2. The exposures shown in this report are based on estimates of the values of the portfolio holdings as of the date shown on the report.
- 48 -
ALL WEATHER HISTORICAL PERFORMANCE
All Weather All WeatherTotal Return in USD Total Return in USD
Last 1 Year -21.9% Last 1 Year -22.3%Last 3 Years -1.7% Last 3 Years -2.2%Last 5 Years 4.4% Last 5 Years 3.9%
Last 10 Years 6.0% Last 10 Years 5.4%Annualized Returns (Jun-96 through Apr-09) Annualized Returns (Jun-96 through Apr-09)
Annualized Return 8.1% Annualized Return 7.6%Standard Deviation 11.5% Standard Deviation 11.5%
Sharpe Ratio 0.38 Sharpe Ratio 0.33
All Weather Strategy Performance (Gross of Fees) All Weather Strategy Performance (Net of Fees)
Gross Since Inception Jun-96 through Apr-09 Net Since Inception Jun-96 through Apr-09
Past results are not necessarily indicative of future results.
- 49 -
This page contains the allocation information for the historical simulation of the Safe Portfolio. Asset class returns from January 1920 to the present are actual market returns where available and otherwise a proxy index constructed based on Bridgewater Associates understanding of global financial markets. Information regarding specific indices and simulation methods used for proxies is available upon request (except where the proprietary nature of information precludes its dissemination). Results are hypothetical or simulated and gross of fees unless otherwise indicated. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
PORTFOLIO NOTES
Note: The Safe Portfolio approach is not a guarantee of returns or a guarantee against losses. Bridgewater does not purport that the Safe Portfolio can control or mitigate market risk or any other type of risk.
Capital Allocation
Gold 10%T-Bills 30%IL Bonds 40%T-Bonds 20%
- 50 -
This page contains the allocation information for the historical simulation of the Japan Safe Portfolio. Asset class returns from January 1920 to the present are actual market returns where available and otherwise a proxy index constructed based on Bridgewater Associates understanding of global financial markets. Information regarding specific indices and simulation methods used for proxies is available upon request (except where the proprietary nature of information precludes its dissemination). Results are hypothetical or simulated and gross of fees unless otherwise indicated. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
PORTFOLIO NOTES
Note: The Safe Portfolio approach is not a guarantee of returns or a guarantee against losses. Bridgewater does not purport that the Safe Portfolio can control or mitigate market risk or any other type of risk.
Capital Allocation
Gold 10%Japanese T-Bills 30%Japanese IL Bonds 40%Japanese T-Bonds 20%
- 51 -
This page contains the allocation information for the historical simulation of the Conventional portfolio prior to 1970. The portfolio capital allocation weights (illustrated below) are estimates based either upon Bridgewater Associates’ understanding of standard asset allocation (which may change without notice) or information provided by or publicly available from the recipient of this presentation. Asset class returns from January 1920 to the present are actual market returns where available and otherwise a proxy index constructed based on Bridgewater Associates understanding of global financial markets. Information regarding specific indices and simulation methods used for proxies is available upon request (except where the proprietary nature of information precludes its dissemination). Results are hypothetical or simulated and gross of fees unless otherwise indicated. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
PORTFOLIO NOTES
Capital Allocation
U.S. Equities 65%U.S. 10-year Bonds 35%
- 52 -
This page contains the allocation information for the historical simulation of the Conventional portfolio, from 1970 onwards, as well as forward looking assumptions for expected returns, volatility, tracking error, and correlations used in this analysis. The portfolio capital allocation weights (illustrated below) are estimates based either upon Bridgewater Associates’ understanding of standard asset allocation (which may change without notice) or information provided by or publicly available from the recipient of this presentation. Asset class returns are actual market returns where available and otherwise a proxy index constructed based on Bridgewater Associates understanding of global financial markets. Information regarding specific indices and simulation methods used for proxies is available upon request (except where the proprietary nature of information precludes its dissemination). Results are hypothetical or simulated and gross of fees unless otherwise indicated. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
AsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsseAsse
Com
mod
ities
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Cur
renc
y
Equi
ties
Equi
ties
Equi
ties
Equi
ties
Infla
tion-
Link
ed B
onds
Nom
inal
Bon
ds
Rea
l Est
ate
Com
mod
ities
(GSC
I - E
xten
ded)
AUD
vsU
SD
CAD
vsU
SD
CH
FvsU
SD
DKK
vsU
SD
EUR
vsU
SD
GBP
vsU
SD
HKD
vsU
SD
JPYv
sUSD
NO
KvsU
SD
NZD
vsU
SD
SEKv
sUSD
SGD
vsU
SD
U.S
. Lar
ge-C
ap E
quitie
s (E
xten
ded)
U.S
. Priv
ate
Equi
ty /
VC (E
xten
ded)
U.S
. Sm
all-C
ap E
quitie
s (E
xten
ded)
Wor
ld E
quitie
s Ex
-US
(Ext
ende
d)
U.S
. IL
Bond
s (E
xten
ded)
U.S
. Bon
d Ag
greg
ate
(Ext
ende
d)
U.S
. Rea
l Est
ate
(Ext
ende
d)
ExposureAsset Class Exposure Allocation Return Volatility RatioAsset Commodities Commodities (GSCI - Extended) 2.00% 5.85% 23.38% 0.25 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.20 0.20 0.20 0.20 -0.20 0.40
Asset Currency AUDvsUSD 0.69% 0.00% 11.48% 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency CADvsUSD 1.05% 0.00% 6.38% 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency CHFvsUSD 0.91% 0.00% 14.08% 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency DKKvsUSD 0.08% 0.00% 12.96% 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency EURvsUSD 4.26% 0.00% 13.15% 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency GBPvsUSD 3.19% 0.00% 11.67% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency HKDvsUSD 0.22% 0.00% 5.13% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency JPYvsUSD 3.05% 0.00% 13.59% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency NOKvsUSD 0.11% 0.00% 11.66% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency NZDvsUSD 0.03% 0.00% 14.62% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency SEKvsUSD 0.30% 0.00% 12.45% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Currency SGDvsUSD 0.11% 0.00% 5.41% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Equities U.S. Large-Cap Equities (Extended) 40.00% 4.16% 16.63% 0.25 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00 1.00 0.75 -0.20 0.20 0.40
Asset Equities U.S. Private Equity / VC (Extended) 3.00% 5.76% 23.03% 0.25 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00 1.00 0.75 -0.20 0.20 0.40
Asset Equities U.S. Small-Cap Equities (Extended) 5.00% 5.03% 20.10% 0.25 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00 1.00 0.75 -0.20 0.20 0.40
Asset Equities World Equities Ex-US (Extended) 14.00% 5.23% 17.43% 0.30 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.75 0.75 0.75 1.00 -0.15 0.15 0.30
Asset Inflation-Linked Bonds U.S. IL Bonds (Extended) 3.00% 1.44% 5.75% 0.25 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.20 -0.20 -0.20 -0.15 1.00 0.20 0.40
Asset Nominal Bonds U.S. Bond Aggregate (Extended) 23.00% 1.63% 6.50% 0.25 -0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.20 0.20 0.15 0.20 1.00 0.40
Asset Real Estate U.S. Real Estate (Extended) 5.00% 4.64% 18.56% 0.25 0.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.40 0.40 0.40 0.30 0.40 0.40 1.00
Exposure TypeCorelation matrix, Sharpe ratios and return expecations based on Bridgew ater assumptions. Beta volatilities estimated using historical data from the period 01/01/1970 - 04/01/2009.
Asset Class
Exposure
PORTFOLIO NOTES
- 53 -
Bridgewater All Weather Strategy Gross Performance Disclosure:For the period June 1996 (the inception of the strategy) through August 2001 the performance is based on the total return of the Bridgewater All Weather strategy as implemented for Bridgewater's principals and their affiliates and was not fully hedged to the US Dollar. The All Weather strategy currently is fully hedged, and the performance reflected after August 2001 includes these hedging transactions. For the period of August 2001 through present the performance shown is the actual total returns of the longest running fully funded All Weather account. For the entire history excess returns are calculated by subtracting the cash return of the US repo rate from the total returns described above. Of note, the All Weather strategy’s target leverage, volatility and return, as well as the asset mix varied from June 1996 to July 2005. From August 2005 through the present the strategy has targeted 10% volatility. Bridgewater manages additional All Weather portfolios not included in this performance history.
The performance provided is gross of management fees and includes the reinvestment of all interest, gains, and losses. Returns will be reduced by the investment advisory fees and any other expenses that may be incurred in the management of the account. Investment advisory fees are described in Part II of Bridgewater’s Form ADV. No representation is being made that any account will or is likely to achieve returns similar to those shown. Trading in futures is risky and can result in losses as well as profits. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Bridgewater All Weather Strategy Net Performance Disclosure:For the period June 1996 (the inception of the strategy) through August 2001 the performance is based on the total return of the Bridgewater All Weather strategy as implemented for Bridgewater's principals and their affiliates and was not fully hedged to the US Dollar. The All Weather strategy currently is fully hedged, and the performance reflected after August 2001 includes these hedging transactions. For the period of August 2001 through present the performance shown is the actual total returns of the longest running fully funded All Weather account. For the entire history excess returns are calculated by subtracting the cash return of the US repo rate from the total returns described above. Of note, the All Weather strategy’s target leverage, volatility and return, as well as the asset mix varied from June 1996 to July 2005. From August 2005 through the present the strategy has targeted 10% volatility. Bridgewater manages additional All Weather portfolios not included in this performance history.
The performance provided is net of fees and includes the reinvestment of all interest, gains, and losses. The net of fees returns have been calculated using our standard fee schedule for a minimum size account, which are the highest fees we have or would currently charge an account. Investment advisory fees are described in Part II of Bridgewater’s Form ADV. No representation is being made that any account will or is likely to achieve returns similar to those shown. Trading in futures is risky and can result in losses as well as profits. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Performance as of the current month is estimated and subject to change.
All Weather Simulated Portfolio Note:Prior to June 1996, All Weather is simulated and gross of all fees (including investment management fees). All Weather is constructed using a proprietary mix and weighting of assets. The returns used to construct All Weather are actual market returns where available and Bridgewater Associates' estimates otherwise. Bridgewater Associates' estimates for various market returns are based on Bridgewater Associates' understanding of global financial markets and may change without notice. The benchmark cash return is defined as the Repo rate since 1991 and prior to 1991 the lesser of the 3 month T-bill times 1.05 and the 3 month Euro rate. For a description of the limitations of simulated portfolios please see the “Simulated Performance Disclosure” below.
- 54 -
Simulated Performance Disclosure:WHERE SHOWN, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
Terminology: Value added (or excess return) is calculated by subtracting the official returns of each account's specified benchmark from the total return experienced by the account over a given period.
Volatility of value added (or tracking error) refers to the standard deviation of monthly value added over a given time period. Standard deviation of monthly value added is one possible measurement of portfolio risk. Past value added and past volatility are not necessarily indicative of future value added and future volatility. There can be no assurance that the future value added and future volatility actually reflected in accounts will be at historical levels or levels either specified in the investment objectives or suggested by our forecasts.Target volatility (or target tracking error) is an indication of the long-term expected volatility of value added.Sharpe ratio is calculated by dividing the excess return above cash over a given period by the volatility of the excess return during the same period. Information Ratio is calculated by dividing the excess return above a given benchmark over a given period by the volatility of the excess return during the same period.Alpha: The risk taken by active managers above and beyond their passive, benchmark-replicating positions.Beta: The risk in a portfolio that arises from passively holding asset classes.Portfolio VaR: A measure of the amount of a total portfolio’s risk, taking into consideration correlations within and across asset classes.Var Share: A measure of the portion of a total portfolio’s risk allocated to a particular return stream when all of its return streams are assumed to be fully correlated to each other.CoVar Share: A measure of the portion of a total portfolio’s risk allocated to a particular return stream when the cross correlations of all of the return streams are taken into account.Drawdowns: Where shown, drawdowns are from previous peak.
Expected Performance Disclosure:Where shown, expected performance is based on Bridgewater analysis of market data, quantitative research of the underlying forces that influence asset classes and our active management policies. The performance is for informational and educational purposes only and should not be relied upon as a prediction of future market performance or Bridgewater management performance. Reasonable people may disagree with the assumptions used and expectations developed there from and there is no guarantee the expectations shown can be achieved. Expected performance is considered hypothetical and is subject inherent limitations such as the impact of concurrent economic or geo-political elements not addressed in the analysis and market factors, such as lack of liquidity. Bridgewater Associates is not obligated to provide recipients hereof with updates or changes to such data. Investment decisions should not be made based upon expected results alone. Bridgewater Associates Inc. employees may have long or short positions in and buy or sell securities or derivatives referred to in this research. Those responsible for preparing this research receive compensation based upon various factors, including, among other things, the quality of their work and firm revenues.
Volatility Disclosure:Expected or target volatility is one objective of Bridgewater's active management style. Statements regarding expectations or targets should not be considered a guarantee that such results will be achieved. Expected or target volatility is only one measure of risk. Discussions of risk management processes or theories contained herein should not be construed as a statement that Bridgewater has the ability to control risk or that the investments discussed are low risk.
Individually Managed Accounts:Individually managed account performance will vary based on constraints, funding levels and other factors.
- 55 -
Research/Outlook Disclosure:This research is based on Bridgewater Associates, Inc. proprietary research and analysis of global markets and investing. Bridgewater research utilizes (in whole and in part) data and information from public, private, and internal sources. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. Bridgewater considers the external sources reliable but does not assume responsibility for their accuracy. Major external private and public databases used include the International Monetary Fund, central monetary authorities of G-8 countries, the OECD, the Commerce Department, and external data vendors, such as DRI, DataStream, Compustat, Bloomberg, Lipper Tass, Worldscope and Morningstar.
The views expressed are solely those of Bridgewater Associates, Inc. and are subject to change without notice. Reasonable people may disagree. You should assume that Bridgewater Associates Inc. has a significant financial interest in one or more of the positions and/or securities or derivatives discussed. Bridgewater Associates Inc. employees may have long or short positions in and buy or sell securities or derivatives referred to in this research. Those responsible for preparing this research receive compensation based upon various factors, including, among other things, the quality of their work and firm revenues.
The research in this presentation is for informational and educational purposes only and is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, where appropriate, seek professional advice, including tax advice. Investment decisions should not be based solely on simulated, hypothetical or illustrative information. The price and value of the investments referred to in this research and the income therefrom may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.
Bridgewater Associates has no obligation to provide recipients hereof with updates or changes to such data. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Bridgewater Associates, Inc.®
