Ray Dalio, the billionaire founder of Bridgewater Associates, is known for many things in the financial industry, including starting one of the biggest hedge funds in the world. He is also known for the All Weather Fund, which aims to do well in all markets. This article explores whether the State Street Bridgewater All Weather ETF (ALLW) is a good investment today.
What is the ALLW ETF?
ALLW is a mid-sized ETF with over $2 billion in assets under management (AUM) and an expense ratio of 0.85%. Launched in March last year, the fund aims to give retail investors access to a fund built on Ray Dalio’s all-weather strategy.
An all-weather fund aims to do well in all market conditions. As a result, unlike other passive funds, it is actively managed and is rebalanced every month. The goal of this rebalancing is to adjust to the various sensitivities to economic environments.
This fund also aims to address the limitations of the 60/40 portfolio. For starters, this is a portfolio that invests 60% in stocks and 40% in bonds. Since bonds tend to be less volatile than stocks, 90% of the risk in a 60/40 portfolio usually comes from equities.
ALLW solves this by creating a more diversified portfolio with stocks, bonds, inflation-linked bonds, commodities, and gold. Its goal is to help investors move from a concentrated portfolio to a more balanced and diversified one.
A look at its portfolio shows that its biggest constituent today is the SSI US GOV MONEY MARKET CLASS, which aims to maximize current income and preserve capital by investing in short-term government bonds. This asset accounts for about 32% of the entire portfolio.
It is then followed by the State Street SPDR Portfolio S&P 500 ETF (SPYM) that accounts for 13% of the fund. This fund is made up of the biggest 500 companies in the United States, including top names like Apple, Nvidia, and Micron.
The fund also holds an ETF that tracks the biggest companies in the emerging markets like TSMC and Alibaba. It also holds gold and an index that tracks top commodities.
These investments helps to make it a dividend ETF, with its yield being about 2.85%. Not a high one, but better than other top funds like SPY and QQQ.
Is ALLW a good ETF?
ALLW ETF was started in March last year, meaning that its long-term performance is not known. Since its inception, ALLW has jumped by about 26% and is now hovering near its all-time high. It has lagged behind the performance of the S&P 500 Index, which has jumped by 40% in the same period. It ha also underperformed the popular SCHD ETF, which has risen by 33%.
The same is happening this year, where the ALLW ETF has risen by 9.19%, lower than SCHD’s 27% and VOO’s 13.3%. As such, while past performance is not always an indicator of what to come, analysts recommend investing in winners. For example, investors who allocated in the Nasdaq 100 Index have done better than those who invested in S&P 500.