Bridgewater's Ray Dalio advises being underweight cash due to inflation environment

Ray Dalio, founder of Bridgewater Associates LP, attends a panel discussion at the Bloomberg New Economy Forum in Beijing, China, November 21, 2019. (Photo: CFP)

U.S. investor Ray Dalio, founder of the world's largest hedge fund, says investors need to be mindful of the current inflationary environment and stop viewing cash as a safe investment.

The comments come as major central banks around the world have started or are preparing to tighten monetary policy to curb rising inflation pressures, even as the Omicron coronavirus variant poses a risk to the global economic outlook.

"The mindset needs to change in which everybody looks at the returns in real terms," Dalio, the founder of Bridgewater Associates, told a virtual UBS Greater China conference this week.

"In other words, inflation adjusted because you want buying power, that's what you're trying to store."

"If you're holding an asset that has very little return virtually and is not volatile, but loses to inflation... you have to start to look at that and so basically for the most part underweighting or under-using that cash," he said.

Instead, he suggested investors stay very well diversified, in terms of currency and geography, without elaborating further.

Bridgewater is one of the most active foreign hedge fund operating in China, since it registered with the Chinese authority in 2016. It now has more than 10 billion yuan ($1.57 billion) of assets under management in China.