(Bloomberg) -- Bridgewater Associates’ onshore China hedge fund is adding exposure to local stocks and bonds after a rally in risk assets boosted returns in the first quarter to 6.4%, beating most local rivals.

The Shanghai-based private fund management arm told investors in its All Weather Plus strategy that the systematic multi-asset portfolio contributed a 3.8% return for the period, when policymakers stepped up support for the local economy and markets, according to a letter seen by Bloomberg. Active management by its team added a 2.1% gain. 

Allocations across asset classes helped the world’s largest hedge fund firm buffer the impact from a selloff in China’s stock market that imposed deep losses on local quants. The government has since intervened with trading curbs and additional support for the economy, prompting a broad market rally. 

“Looking back, lower-than-expected inflation and stronger-than-expected interest-rate cuts benefited our long bond positions,” Bridgewater said in the letter. “The improvements in cyclical economic conditions later in the quarter supported long stock positions.” 

Bridgewater declined to comment.

Among the All Weather portfolio, bond holdings and commodities contributed 2.4% and 1.4% respectively, while stocks added 0.1%, according to the letter, which didn’t provide more details. The fund gained 3% in March alone, the document showed. The returns helped onshore assets under management exceed 40 billion yuan ($5.5 billion) for the first time. 

The 6.4% quarterly result, which is before fees, compares with a 0.1% average loss among local multi-asset hedge funds, and ranks Bridgewater the fourth-best performer among funds managing more than 5 billion yuan, according to data compiled by Shenzhen PaiPaiWang Investment & Management Co. 

The fund is adding short-term bonds “moderately” as it expects policies to remain accommodative with inflation near zero and property-market deleveraging weighing on growth, according to the letter. It’s “slightly” increasing long-term debt holdings. 

It’s also “moderately” adding stocks as corporate profit growth may exceed market expectations, and is “neutral” on commodities, the letter showed. 

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