Ray Dalio is the founder of Bridgewater Associates which manages over $150 billion in assets. Bridgewater Associates runs one of the largest hedge funds in the world, and their Pure Alpha fund has over $45 billion assets under management. Dalio and Bridgewater specialize in hedging risks either in the credit, commodity or currency markets. Bridgewater has been able to average a return of 18% for the past ten years. Bridgewater manages money for institutional investors, ranging from governments, central banks, endowments and pension funds. Dalio is ranked as one of the top 100 wealthiest Americans and has pledged to give 10% of his annual salary to charities. Not only recognized for their success as money managers, Bridgewater has gained a reputation as a cult-like company that follows the personal guidance of Dalio and his beliefs.
The son of a musician in Long Island, Ray Dalio started his career as a trader fairly early in his life. It is well documented that Dalio got hooked on stocks when his first trade netted him a 300% return. He bought Northeastern Airlines which soon thereafter went through a merger. Dalio went to Long Island University for undergraduate work and got his MBA from Harvard Business School. Dalio began his career working on the floor of the NYSE for Merrill Lynch. After that, he began trading commodities in 1974 for Shearson Haydon Stone. Dalio was ultimately fired from SHS by Sandy Weill which led to him founding Bridgewater Associates in his apartment on East 64th Street in 1975. Despite some lean years, Bridgewater has been one of the top performers in the hedge fund world for the past twenty years and has averaged over a 10% return since inception. Dalio is routinely invited to speak with financial publications like CNBC, Bloomberg, WSJ and others.
Originally, Bridgewater Associates was a fixed income and currency advisor for institutional clients. Through time, Bridgewater expanded its expertise to include advice on hedging interest rate and commodity price risks. Bridgewater routinely works with some of the biggest companies and entities in the world. This includes, but is not limited to, central banks across the globe, Nabisco, McDonalds, CalPERS and Georgetown University, just to name a few. In the 1980s, Bridgewater changed its focus from currency and interest rate management to global bonds and currencies. In June 1991, Bridgewater launched its Pure Alpha Strategy, which it closed to new investors back in 2006. The Pure Alpha Strategy was so successful that the firm has had to send money home to investors in order to keep the original strategy viable. In response to the popularity of the Pure Alpha Strategy, Bridgewater launched a sister fund, called All Weather, which is beta based strategy in 1996. Recently, Bridgewater started a more liquid version of these funds, but they are only open to existing clients.
One of the more striking features of Bridgewater Associates is the corporate culture that Dalio has created. Dalio has been steadfast in his belief that the striving to find excellence or truth is the ultimate journey. Although not ‘crazy’ at face value, the way in which Dalio and Bridgewater has gone about this goal has been called into questions numerous times. The company itself stresses doing ‘whatever it takes to make the company great.’ The company is based on the principle of ‘radical transparency’ where finding the truth and what they can improve on trumps how you go about obtaining that information. Ranking and title mean nothing as Bridgewater operates on a meritocracy. These principles are followed ‘at all cost’ and are the basis for Dalio’s book, Principles. There is no argument that Dalio has been incredibly successful, but many question his methods and what exactly he is creating at Bridgewater.
This ‘at all cost’ mantra had been both beneficial and detrimental to Bridgewater. One of the biggest detriments to Bridgewater has been the turnover. Bridgewater routinely loses about 30% of their hires within the first two years, which is three times higher than the average for the industry. Also, there is no way to quantify how many people never apply because they are weary of Dalio and his ways. On the flipside, there are numerous benefits as well. Dalio’s main goal is find the root of the problem and how to fix it. By holding open and honest discussions, although feelings might be hurt, they can find the cause and what is needed to fix it. At Bridgewater, having weakness and making mistakes is nothing embarrassing, but rather part of the process of finding the truth and growing as a person. Bridgewater claims that this way of management leads to better decision making. Better decision making helps their employees evolve at a faster pace than doing things in isolation. Another benefit is the team building as everyone knows everyone’s strengths and weakness.
Many employees have stated that this culture promotes honesty and trust as employees know where they stand with upper management. Also, there are supposedly no rumors or gossip as complaints are encouraged and rewarded and therefore do not need to be hidden. Employees know that it they have an idea that will make the company better, it will be seriously considered which gives them more of connection to the company and its results. This openness in decision making also helps employees understand why decisions are being made and the rational behind them. The idea behind this type of culture is to let there be an open and honest exchange of ideas without worrying about egos. When feelings are taken out of the equation, one can focus on the problem at hand and solely the problem at hand. Although this is certain unique, Bridgewater Associates was the fastest growing asset manager from 2000 – 2005.
According to Forbes, Dalio makes anywhere between $500 – $600 million annually and is worth roughly $6 billion. That would make him about the 50th wealthiest man in America and 160 wealthiest in the world. Dalio says he gives about 10% of his annual earnings to charities, ranging from the Robin Hood Foundation, NYU as well as his charity, the Raymond Dalio Foundation. One of Dalio’s pet projects is transcendental meditation, of which he is an ardent practitioner. Dalio is also an avid hunter of deer and elk and is a bow hunter.