Ray Dalio's hedge fund might be dropped by a California retirement fund after years of disappointing returns, report says

• Ray Dalio's Bridgewater might be dropped by a California employee pension fund, Bloomberg reported.
• The Orange County Employees Retirement System has invested in Dalio's fund since 2005.
• The pension's CIO has recommended putting Dalio's fund on its watch list, according to the report.

Bridgewater Associates, the hedge fund of billionaire investor Ray Dalio, might be dumped by a California retirement fund after more than a decade of disappointing returns, Bloomberg first reported Thursday.

The Orange County Employees Retirement System, a $21 billion pension, has invested in Dalio's Pure Alpha fund since 2005, which has returned an annualized 4.5% - roughly 2.5 percentage points less than its benchmark, according to a memo from Meketa Investment Group, the pension's consultant, viewed by Bloomberg.

The strategy has outperformed the pension's target only once in the last five years and has lagged when it came to a seven- and 10-year time frame, Bloomberg reported.

Pure Alpha, according to the memo, represents almost 10% of the pension's risk mitigation asset class. The pension's CIO, Molly Murphy, has recommended putting Pure Alpha on its watch list, a decision Meketa consultants agreed with, according to the memo.

However, being on a watch list doesn't mean the fund will definitely be dropped. Many hedge funds in recent years have struggled, Meketa consultants said in the memo, pointing to Bridgewater's attempts to improve performance.

Bridgewater, which Dalio founded in 1975, oversees around $175 million for the pension, a tiny percentage of the over $105 billion it manages in its hedge funds.

In 2020, Dalio's Bridgewater lost $12.1 billion for investors, a year when the world's top 20 hedge funds reaped their best returns in a decade. Still, the billionaire was still considered the best-performing hedge fund manager of all time, according to LCH Investments.