While the average hedge fund performance has been lackluster, there are certain hedge funds that do perform very well. Ray Dalio runs one of the largest hedge funds in the world, called Bridgewater Associates, which as of 2018 manages over 125 billion in customer funds. Ray Dalio himself is a billionaire. So when a person like this makes a statement about having found the Holy Grail, then perhaps we should pay attention.
Here is a short 4 min video, where Ray Dalio explains the concept of the Holy Grail. Note that he’ll reference a bunch of terms that you may be unfamiliar with (standard deviation, correlation, alpha, information ratio, etc). Don’t worry, by the time you complete this course, you’ll know and fully understand all of these financial terms.
The main point he’s making is that the Holy Grail can be achieved by trading a variety of trading strategies or portfolios, where the return of each of these portfolios is unrelated to the others. When one strategy or portfolio is losing money, then hopefully the others aren’t losing money at the same time.
The keys are to:
a) have a variety of different portfolio strategies to choose from
b) be able to measure the degree of correlation between these strategies
You’ll be learning both of the above in this course
