Designing an All-Weather Portfolio

Trader Daily had a review of the top 10 hedge fund earners for 2007, and Bridgewater's ($150 billion AUM) Ray Dalio made the list at around $500 million.

If you have been around since the beginning of the blog, you would know that the subtitle is from one of the Bridgewater strategy pieces here - "Engineering Targeted Returns and Risk". In the article Dalio details how he designed an all-weather portfolio for his family trust.

I did my best to replicate the quarterly returns based on correlation, and could only get to about 0.8 as the highest correlation. Can anyone else do better?

Below are the quarterly returns from the portfolio:

3Q96 10.15%
4Q96 7.16
1Q97 -5.46
2Q97 9.81
3Q97 11.30
4Q97 -0.47
1Q98 2.75
2Q98 -0.68
3Q98 -0.81
4Q98 -2.02
1Q99 4.36
2Q99 1.5
3Q99 4.14
4Q99 4.78
1Q00 3.07
2Q00 3.64
3Q00 -2.63
4Q00 5.68
1Q01 -4.88
2Q01 -0.69
3Q01 -1.46
4Q01 1.00
1Q02 3.15
2Q02 1.7
3Q02 1.89
4Q02 3.06
1Q03 0.76
2Q03 8.47
3Q03 1.72
4Q03 4.96
1Q04 7.52
2Q04 -3.33
3Q04 7.05
4Q04 5.76
1Q05 2.17
2Q05 7.32
3Q05 3.88
4Q05 1.42

Comments

[User 159858]

I haven't tried doing it, but does this imply a fixed asset allocation, or perhaps there's some tactical asset allocation involved?