TOKYO -- Bob Prince, co-Chief Investment Officer of Bridgewater Associates, addressed challenges faced by the global economy, and spoke of his desire to "build quality client relationships," including in Japan, in an exclusive interview with Nikkei.
With one of the world's largest hedge fund operations, Bridgewater manages and advises on $160 billion in assets for about 330 major institutional investors including sovereign wealth funds, pension funds and central banks.
"In the last five years, there's been a transformation of the investment landscape" in Japan, Prince said, as ultralow interest rates push investors like the mammoth Government Pension Investment Fund to diversify and be more creative.
The American firm has "some" interest in expanding its asset base in Japan, Prince said. But he added that "we've always been careful about who we work with. We want to work with innovative clients."
About half of Bridgewater's asset base resides in the U.S., along with roughly 25% located in the European Union and the rest spread worldwide.
"For many years, we've not focused on accepting new clients because we've allowed room for the existing clients to have bigger relationships with us," Prince said. "In the last 10 or 15 years, our asset growth has been to do more with existing clients."
Prince acknowledged that global markets face a delicate situation. Central banks are "trying to avoid a downturn by stimulating before it happens," the executive said.
"The banks have the ability to lend money, and the governments are talking about spending more," he said. "So the governments are pushing both policy levers to keep things going."
He also stressed the importance of granting businesses access to credit, an element that was lost during the 2008 global financial crisis.
"The pipes of providing credit are still open," Prince said, noting that he considers a U.S. recession unlikely anytime soon.
Prince said "it's most likely a close call" whether the slump in manufacturing will spread to consumer spending, but he predicted that consumption will keep up.
Despite growing political risks that hamper corporate profits, the Bridgewater exec saw equities as a better investment than bonds.
"It's still a close call there, too, but probably over the longer term, stocks will outperform bonds," he said, even more so in developing economies.
Prince parsed the current U.S.-China economic tensions, saying "you have a trade war, but not a capital war." But he warned of longer-term risks to the dollar.
"The supply of bonds will be gradually increasing over the next 10 years, and tensions will probably gradually escalate over 10 years," he said. "And over even a longer a period of time, the U.S. dollar as the primary reserve currency can be challenged."
Prince also reflected on the limits of artificial intelligence in asset management.
"We don't use the computer to do the discovery of how the world works. That gets you data mining and overoptimization, which is dangerous," he said. "I think it's better to use technology than not, but you have to use it correctly."