(Yicai Global) March 19 -- Ray Dalio, the founder of renowned hedge fund Bridgewater Associates, has sought to dispel "a rumor going around China that Bridgewater has 'crashed'" in comments the American billionaire investor made on the Chinese microblogging website Weibo.

"You have my word that that is totally false and that Bridgewater is totally safe," Dalio said. An insider at Bridgewater also told Yicai Global that the that rumor it is in default following a global market slump is untrue, adding that everything is going well for the company.

As of last week, the Connecticut-based firm's All Weather and Pure Alpha fund types had fallen between 10 percent to 20 percent so far this year, Dalio said in its signature Daily Observations research publication yesterday.

"Our losses have been similar to those in our prior worst-performing periods," he said. "In the past we have learned and recovered from these periods and expect that to be the case again."

During the 2008 global financial crisis, the fund once soared 10 percent, even as the benchmark S&P 500 index plummeted nearly 40 percent.

A stunning reversal in the logic of gold, stocks, bonds and commodities as the Covid-19 contagion spread globally is the main cause of Pure Alpha's 20 percent drop, investors said. In keeping with the fund's conventional strategy, Pure Alpha bet on rising stock prices and treasury yields, but Bridgewater also bought stock index put options as an offset.

"The novel coronavirus is a pandemic that came on fast and hit us at the worst possible moment because we had a long tilt in our position," Dalio continued in his Daily Observations comments.

"We had that long tilt because we were positioned to take advantage of the liquidity in the financial and economic system, the levels of interest rate were low relative to other assets' expected returns, and there were no immediate signs of economic decline," he said, "though we did have worries about what a downturn would be like because of the inabilities of central banks to be stimulative at the same time as there were large wealth, political, and geopolitical gaps and conflicts."

Legal Redress

"We might have identified the rumormonger which we will pursue legally and disclose publicly if we are able," Dalio added in his Weibo post.

Dalio earlier predicted the coronavirus' influence would be only temporary and the market would rebound. He encouraged investors not to wait on the sidelines in January, urging them to reap the rewards of a strong market, saying, "Cash is trash."

The Dow Jones Industrial Average and S&P 500 index closed a respective 7.82 percent and 7.01 percent down yesterday, triggering another circuit breaker, the fourth in the last 10 trading sessions and only the fifth since the fuse mechanism's inception following the Black Monday market crash in 1987.

Holding an overall low leverage ratio is a safer strategy in the near term, staffers with an overseas hedge fund told Yicai Global, explaining that despite the Federal Reserve's massive injection of liquidity, the repo market is still relatively tight and banks and larger traders are less willing to extend loans amid extreme risk aversion after a spike in volatility.

This will add to brokerages' margin call pressures on large funds, they noted, adding these funds may also come under further pressure from mass redemptions.

Editor: Ben Armour