Business

NO PRIVATE HEDGE

Bridgewater Associates, the $71 billion money-management firm, has come out against participating in Treasury Secretary Tim Geithner’s plan to get private investors to buy banks’ toxic assets — a week after saying it was interested in it.

In an investor note obtained by The Post, Bridgewater founder Ray Dalio gave Geithner’s plan two thumbs-down, arguing that the hopes of would-be buyers probably won’t be met by what the government is offering, especially when it comes to the sale of so-called legacy securities.

In the note, which is entitled, “Why We Decided Against Buying in the PPIP and Why We Doubt That It Will be Broadly Subscribed,” Dalio cited economic and political concerns with Geithner’s Public-Private Investment Program, dubbed PPIP, saying the numbers just don’t add up — at least when it comes to PIPP’s legacy-securities program.

PPIP aims to remove toxic assets from the system by giving private investors, such as hedge funds and mutual funds, leverage to buy assets through two programs. The legacy-securities program enables those investors to buy older residential and commercial mortgage-backed securities that have been at the heart of many banks’ troubles.

“When the program was first announced, we were originally interested” because the leverage the government was promising made the assets cheaper. “However, as things now stand, very little leverage is actually being offered via the ‘Legacy Securities Program,’ ” Dalio wrote, pointing out that the leverage offered is just 1-to-1.

He also blasted the program for its initial design, saying it is ripe for conflicts, pointing to the plan to hire five asset managers to run everything on behalf of themselves, the government and the other investors.

“The managers are clearly in a conflict-of-interest position because they have both the government and the investors to please and because they will get their fees regardless of how these investments turn out,” Dalio wrote.

Bridgewater’s investors include pension funds, endowments and foreign governments.

He also questioned the political risks that the program’s design could create, saying the limited number of managers “raises possibilities (or at least perceived possibilities) of them colluding because they all know each other.”

And so regardless of whether the investments make or lose money, “there will be reasons for politicians to complain and to focus on the five winners to see how they ‘abused’ the system,” he wrote.

Dalio’s criticism of the program is sure to raise eyebrows, as his firm is one of just a handful that would have likely met Treasury’s requirements for participation. What’s more, Dalio is widely regarded as an influential expert, and recently was named by Alpha Magazine as the fifth-best money maker in the hedge-fund world, behind George Soros.

To be sure, Dalio doesn’t slam everything about PIPP. Indeed, he doesn’t slam the legacy-loan program, in which investors buy loans instead of securities and offers leverage of between 6-to-1 and 12-to-1.

But, “we aren’t interested in illiquid loans,” he said in his note.

Dalio didn’t respond to a request for comment.