Ray Dalio, founder of Bridgewater Associates LP, the world’s biggest hedge fund, said 2013 will be a “game changer” for the economy as investors reallocate money after risks such as Europe’s sovereign debt crisis receded.

“There’s a lot of money in a place that’s getting a very bad return and in this particular year there’s going to be, in my opinion, a shift,” Dalio said today at a Bloomberg panel discussion at the World Economic Forum in Davos, Switzerland. “The complexion of the world will change as that money goes from cash into other things. The landscape will change, particularly later in the year and beyond.”

Global stocks have rallied 17 percent in the past six months as the U.S. housing market recovers, European leaders take steps to contain their debt crisis, and reports in China suggest economic growth is accelerating. Investors from David Tepper, who runs the $15 billion hedge fund Appaloosa Management LP, to Carlyle Group LP co-founder David Rubenstein have said they’re bullish on the U.S. economy this year.

U.S. stocks rose today, giving the Standard & Poor’s 500 Index its longest winning streak since 2004. U.S. mutual funds investing in domestic equities received net deposits for a second consecutive week, reversing a trend of redemptions over the past six years, a report showed this week.

‘Massive Amount’

As investors grow more comfortable with the outlook for the economy, money will move into stocks and other assets, as well as into goods and services, Dalio said.

“The shift of that massive amount of cash is what will be a game changer,” said Dalio, whose Westport, Connecticut-based firm oversaw $81.3 billion in hedge-fund assets as of Oct. 31.

Central banks will have to be on guard to reduce the supply of money when spending increases, Dalio said, adding a successful exit from six years of loose monetary policy is manageable. Billionaire investor George Soros said yesterday that the U.S. Federal Reserve will have to raise interest rates quickly to contain inflation once the economy shows signs of a stable recovery.

Fed Chairman Ben S. Bernanke’s unprecedented bond buying pushed the central bank’s balance sheet to a record $3 trillion, a report yesterday showed. The Fed is purchasing $85 billion of securities every month, using the full force of its balance sheet to stoke the economic recovery.

Dollar Worry

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