HONG KONG, April 21 (Reuters) - Bridgewater China sees resilience in Chinese equities continuing and is tilted bullish on gold, even after its onshore funds suffered a record drawdown in March, according to a letter to investors reviewed by Reuters.
The market view and outlook from the Chinese unit of the world's largest hedge fund are closely watched and provide global investors with signals on macro positioning and asset allocation amid disruptions brought on by the Iran war.
"Chinese assets held up better than most global counterparts" amid a market rout triggered by the conflict, thanks to its continued energy reserve investment, Bridgewater (China) Investment Management said in the letter sent in April.
China's energy reserves and low inflation stand it in good stead to resist further shocks, and Beijing retains "ample policy room, tools and capability" to respond if things get worse, the letter said.
The relative outperformance of Chinese assets over the past few months is drawing fund managers' attention.
Bridgewater China did, however, shift to a more neutral stance on Chinese bonds due to imported inflation risks.
It is slightly overweight on gold, arguing short-term factors have been dragging on the price recently and that long-term concerns over the credibility of fiat currencies and sovereign debt should be supportive.
Bridgewater China's flagship yuan-denominated All Weather Plus No.3 fund, designed to withstand volatility, lost 6.4% in March before fees, the biggest monthly drop since its launch in 2021, according to the letter.
That trimmed the fund's first-quarter gains to 4.2%, the letter showed. During the period, the Shanghai Composite (.SSEC), lost 1.9% and global stocks (.MIWD00000PUS), fell 3.5% as soaring energy prices hit nearly every asset class.
Bridgewater China declined to comment to a Reuters email on the fund's performance and market view.
Its All Weather Plus strategy invests in Chinese stocks, bonds and commodities. Other tranches of All Weather Plus funds posted similar results, according to investors.
The All Weather Plus funds have rebounded strongly so far in April, per investors familiar with the performance.
(This story has been corrected to say Bridgewater China, not fund, in paragraphs 6 and 8 and corrects to say All Weather Plus strategy, not fund, in paragraph 11)
Reporting by Summer Zhen; Editing by Harikrishnan Nair
