Animal Spirits Podcast — Talk Your Book: Investing in the All Weather Strategy

Date: September 29, 2025
Hosts: Michael Batnick (“A”) & Ben Carlson (“B”)
Guests: Matt Bartolini (State Street Investment Management, “D”), Chris Ward (Bridgewater Associates, Portfolio Manager, “C”)

Overview of the Episode

This episode dives into the famed "All Weather" investment strategy, originally pioneered by Ray Dalio and Bridgewater Associates, now available in an ETF format through a partnership with State Street. The conversation breaks down the philosophy, construction, practicality, and potential fit of the All Weather ETF (ticker: ALLW) in client portfolios, demystifies misconceptions about leverage, and discusses how this institutional approach has become accessible to retail investors for the first time.

Key Discussion Points & Insights

1. What is the All Weather Strategy?

• Origins & Philosophy
  • Bridgewater’s All Weather strategy, developed in the 1990s by Ray Dalio, aims to perform consistently across all economic environments by diversifying risks across asset classes that respond differently to changes in growth and inflation.
  • “All Weather was our best answer to that question... can you build a portfolio that performs well in any economic environment, with equity-like returns but without boom-bust?” — Chris Ward (03:23)
• Objective
  • To minimize vulnerability to adverse shifts in economies by holding a risk-balanced mix designed for resilience and consistency over the long term.

2. Bringing All Weather to an ETF Wrapper

• The ETF launched earlier this year and already attracted nearly $400M in assets as of mid-September.
• “It’s a relatively boring by design strategy. Holy cow.” — Michael Batnick (01:19)
• Bridgewater serves as subadvisor, providing the model, while State Street manages ETF operations and tax efficiency for retail investors.

3. Four-Box Framework: Growth and Inflation as Key Drivers

• The core framework maps asset class performance across four economic scenarios:
  • Rising Growth
  • Falling Growth
  • Rising Inflation
  • Falling Inflation
• Portfolio is designed so each “quadrant” receives 25% of the portfolio’s risk (not capital).
  • Equities & commodities (excluding gold): Do well when growth surprises to the upside.
  • Nominal bonds, inflation-linked bonds, gold: Do well when growth underperforms.
  • Commodities, gold, TIPS: Hedge against rising inflation.
  • Nominal bonds, equities: Perform in falling inflation.
• “All assets implicitly discount a future scenario... At the macro level, we think that growth and inflation are the key drivers.” — Chris Ward (05:54)

4. Portfolio Construction & Evolution Over Time

• The basic framework remains timeless, but asset choices evolve based on shifts in markets, interest rate regimes, and learnings from new environments (e.g., zero-rates).
• Example: Choice of commodities exposure via total return swaps (for tax efficiency) rather than holding direct futures or physicals, and avoiding structures that generate K-1 tax forms for US investors.
• “We do have game plans for these types of decisions... We don’t have a fixed target to something like government bonds or TIPS. Our rules help us hire the right assets for their jobs.” — Chris Ward (09:47)

5. ETF Implementation & Access for Retail Investors

• Building the ETF version involved translating the institutional approach into something accessible and tax-efficient for individuals.
• Use of futures for leverage (especially for bonds); swaps for commodities exposure to minimize tax friction.
• “Mathematically, it’s really hard for that DIY investor to even come close to achieving this type of exposure.” — Matt Bartolini (27:53)
• Bridgewater actively decides which instruments and weights, but it’s not ‘tactical’ in the traditional sense — the strategy is “strategic, not tactical” (23:43).

6. Role in Portfolios — Replacement or Complementary?

• Not a pure 60/40 substitute for most; typically used alongside traditional portfolios as a source of uncorrelated returns and diversification.
  • Historically: Used as bond replacement during the low-yield environment.
  • Recently: Used as partial equity replacement, as investors seek diversification amid rich US stock valuations.
• “It’s just, it’s really a one-stop shop line item that can help investors plug a lot of gaps in their portfolio.” — Chris Ward (13:55)

7. Addressing the Leverage Question

• The All Weather ETF is “capital efficient”— for every $1 invested, roughly $1.80 of underlying exposures are held, mainly via futures.
• Leverage is not for chasing higher returns but for leveling volatility between stocks and bonds, so bonds “carry their weight.”
  • “Why not move $5 of stocks into $10 of bonds? ...You get more diversification without sacrificing expected return.” — Chris Ward (15:58)
• Risks when stock-bond correlations converge (e.g., in times of inflation shocks), but the inclusion of real assets and ongoing “game plans” mitigate risk.

8. Recent Performance and Real-World Scenarios

• In brief periods where “cash is king” (e.g., 2022, “Liberation Day” event), All Weather falls but recovers as policy stabilizes markets.
• “It fell less than stocks, fell more than bonds... but was able to rally back and act as that diversifier.” — Matt Bartolini (19:55)

9. DIY Replication and Cost Considerations

• Bridgewater’s research, access to futures/swaps, and operational scale are cited as nearly impossible for individuals to replicate cost-effectively.
  • “You really can’t do that with ETFs... you have to use other instruments.” — Matt Bartolini (27:53)

10. Bridgewater Culture Shift: Institutional to Retail Access

• Bridgewater had always hoped to offer this strategy to retail but implementation hurdles and regulation delayed it until now.
  • “The excitement internally now that we’re doing it is palpable.” — Chris Ward (31:19)

Notable Quotes & Memorable Moments

On the Philosophy of All Weather

“Diversification doesn’t need to feel like eating your broccoli. All Weather tries to create both [diversification and returns].”
— Chris Ward (04:23)

On the Four-Box Framework

“At the macro level, we think that growth and inflation are the key drivers... Once you understand these relationships, you can use that as your building block.”
— Chris Ward (05:54, 07:36)

On Leverage and Capital Efficiency

“If you invest a dollar in the ETF, you are getting about a dollar and 80 cents of exposure to assets... when you own bonds, bonds are there to give you real returns when you need it, not just dampen your losses by not being stocks.”
— Chris Ward (15:32)

On Portfolio Adaptation

“We don’t have a fixed target to something like government bonds... We do have game plans for these types of decisions... adapt when unusual circumstances arise.”
— Chris Ward (09:47)

On DIY Replication

“Mathematically, even beyond the fundamental association with Bridgewater, it’s really hard for that DIY investor to even come close to achieving this type of overall exposure.”
— Matt Bartolini (27:54)

Timestamps for Key Segments

| Timestamp | Topic | |------------|----------------------------------------------------------------------------------------| | 02:54 | Origins & goals of the All Weather strategy (Chris Ward) | | 05:08 | The Four-Box (growth/inflation) framework | | 09:04 | Adapting to market evolution, structural and cyclical changes | | 11:17 | Translating All Weather to an ETF and accounting for tax efficiency (Matt Bartolini) | | 13:13 | Fit in portfolios — substitute or complement? (Chris Ward) | | 15:10 | Addressing leverage and capital efficiency | | 17:26 | Stock-bond correlation risk, “nightmare scenario” 2022 | | 19:46 | Performance during “Liberation Day” (Matt Bartolini) | | 20:31 | How the ETF gets leverage—actual instruments used (Chris/Bridgewater) | | 21:43 | When does All Weather shine vs. US stocks? | | 23:30 | How active is the strategy? Rules-based vs. tactical? | | 24:41 | How risk allocations are set—expected volatility approach | | 26:12 | What about oil? Commodities? Any shorting? (No; long-only, broad commodity basket) | | 27:53 | Why DIY replication is so difficult and impractical | | 29:51 | The Bridgewater culture shift: delivering “institutional” strategies to retail clients | | 32:04 | Resources for learning more and accessing the ETF |

Recommendations & Where to Learn More

• ETF Ticker: ALLW
• Resources:
  • State Street's website: ssga.com
  • Check for white papers & holdings transparency.
  • “You can see the holdings on a daily basis.” — Matt Bartolini (32:04)
• Suggested Use: As a portfolio diversifier or “one-stop” allocation to reduce over-exposure to single asset classes, not necessarily as a total 60/40 replacement.

Summary

This episode provides a deep, clear discussion of the All Weather investment philosophy, its practical mechanics, and its new accessibility in ETF form. The guests explain not just how the strategy works in theory but how it has adapted to market changes and the distribution innovations that allow ordinary investors to access a once-institutional-only approach. The episode should be especially valuable to listeners looking for robust portfolio construction ideas, clarity on leverage and diversified risk allocation, and practical ETF implementation details.