Bridgewater’s Dalio backs down, but his philosophy persists

(Reuters) – Ray Dalio is known as much for his unique philosophy as for his investment performance. While his decision to relinquish control of Bridgewater, the world’s largest hedge fund, marks a major transition for the storied company, his influence will continue.

Bridgewater co-CEOs Nir Bar Dea and Mark Bertolini announced on Tuesday that the company’s transition from a founder-run boutique to “a sustainable institution” was complete, with the transfer of control of Bridgewater from Dalio to the operational board of directors.

This follows Dalio’s transition out of management in 2017 and a move in 2020 to oversee the investment committee, the company said. Dalio, 73, will continue as a mentor, board member and remains an “important part” of the Bridgewater community, the company said.

Dalio, whose fortune is estimated at $19.1 billion by Forbes magazine, helped pioneer a style of investing based on macro themes that aimed to beat the stock market through a dizzying array of financial instruments ranging from timber to Greek bonds to currency futures. As a result, Dalio is often known for conversing knowledgeably on a wide range of world events and frequently publishes essays on topics such as the reform of capitalism, the growth of China and the future of cryptocurrency. bitcoins.

At the same time, Dalio often focused much of his attention on what the trends he observed in the financial markets said about human emotions. Bridgewater Associates employees were encouraged to tear down the ideas of others through ruthless criticism intended to leave ego behind, a philosophy Dalio described in his book, “Principles: Life & Work,” and a TED talk that accompanies him.

Dalio championed the unconventional management style of the company, which was known for its relatively high turnover in which around 25% of employees left within their first 18 months on the job.

“It’s a culture, but it’s the opposite of a cult,” Dalio told the Milken Institute’s global conference in Los Angeles in 2016.

Dalio, born in Jackson Heights, Queens, as the only child of a jazz musician and housewife, started caddying for Wall Street investors at age eight in the Long Island suburb where his family moved, receiving stock advice in exchange. After the shares of the first stock he bought tripled, he “thought it was an easy game,” he told The New Yorker in 2011.

He built a stock portfolio worth thousands of dollars while studying finance at Long Island University and began exploring transcendental meditation after a Beatles trip to India popularized the practice. in America. After graduating, he attended Harvard Business School and then worked as a commodity trader.

He founded Bridgewater in 1975 and later lived and worked in a converted barn in Connecticut. Dalio’s articles on how economic systems work caught the attention of several prominent employee pension funds, and he soon managed money for institutions ranging from the World Bank to Eastman Kodak.

“He had a new way of thinking,” Rusty Olson, Kodak’s pension plan manager, told The New Yorker. “You get the same return, but you also get a hell of a beneficial diversification.”

Dalio’s reputation for making money regardless of global economic trends was cemented in 2008, when his flagship fund, Pure Alpha, gained around 9.5% during the global financial crisis that sank several other top investors. and pushed the S&P 500, the main US stock index, down almost 40%.

However, his fund also failed in the coronavirus pandemic and lost $12.1 billion in 2020 according to data from LCH Investments.

However, he has since rebounded. The Pure Alpha fund for the first three quarters of this year was up 35%, according to a source familiar with the fund.

Following the global financial crisis, Dalio began posting regular essays on LinkedIn in which he detailed his personal philosophy and offered solutions to social ills. Among his most famous articles was a 2019 article in which he argued that worsening income inequality and underinvestment in public education “pose an existential risk to the United States.”

(Reporting by David Randall; Additional reporting by Carolina Mandl in New York; Editing by Megan Davies, Diane Craft and Andrea Ricci)

Copyright 2022 Thomson Reuters.

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