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World's biggest hedge fund manager dumps US over Trump

World's biggest hedge fund manager dumps US over Trump

Political uncertainty in Washington due to the ever-changing cast of characters and infighting is a greater danger to investor returns in US equities than the rising interest rate environment or other action from the US Federal Reserve, according to a prominent hedge fund manager.

According to FTAdviser's sister paper, the Financial Times, Ray Dalio, founder of hedge fund Bridgewater which has assets of $150bn, has said the political climate has prompted him to adopt a more defensive stance on US equities.

US financial markets and the dollar both rallied in the immediate aftermath of the election of Mr Trump, whose campaign rhetoric centred on implementing populist infrastructure spending plans, and tax cuts for US businesses.

Mr Dalio said he was initially optimistic about the election of Mr. Trump, but now takes the view that the instability and in-fighting which appears to be an almost daily occurrence on the West Wing will harm the US government’s ability to deliver on its policies.

Mr Dalio said this, combined with a stock market that fell 1.7 per cent in August, means he has decided to become more defensive in his exposure to the US.

He said the instability in Washington is likely to be more damaging for investors than monetary or fiscal policies.

The Financial Times reports data showing US equity funds have seen net outflows for the past nine consecutive weeks.

The dollar is down 9 per cent this year, while the yield on US government bonds, typically viewed as the safe haven asset class, have fallen, having risen steeply in the immediate aftermath of Trump’s election.

FTAdviser has previously reported that a host of UK fund managers have been withdrawing capital from the US, fearful of the valuation levels.

David.Thorpe@ft.com