|Ray Dalio and Bob Prince:
It’s a way of thinking that is
(Photographs by Michael Edwards)
By Michelle Celarier & Lawrence
Ray Dalio doesn’t want to talk about himself.
His face is drawn, the loss of weight aging the 61-year-old.
Dressed down in corduroys and an open-neck dark blue shirt,
Dalio leans intently across the table, narrows his eyes and
insists that the world’s largest hedge fund firm,
with $87 billion in assets, is bigger than the man who started
it more than 35 years ago.
"It’s not about me," he says brusquely.
But Bridgewater is Dalio. An enigmatic character
whose economic insights are pored over by central bankers
across the globe, he famously started the firm at age 25. Now
Dalio, who is president, chief executive and chief investment
officer of Bridgewater, is starting to pull back. Last year he
sold 20% of his and his family trust’s equity to
senior executives and the firm itself, although he maintains
control. The firm now has two other co-CIOs and co-CEOs and a
nine-person management committee. Moreover, Dalio has been
trying to institutionalize the firm’s brutal
culture to prepare for a Bridgewater without him by penning a
book to live and work by, which he calls, simply,
In terms of performance, last year was
Bridgewater’s best ever, as it netted 44.8% in its
$37 billion Pure Alpha 18% volatility fund and 27.4% in the $11
billion less-levered Pure Alpha 12% volatility fund. Along with
a smaller new fund, and managed accounts, they account for the
$59 billion that makes Bridgewater the largest hedge fund firm
in the world, according to AR’s Billion Dollar
Club. Another $28 billion is in Bridgewater’s All
Weather fund, a leveraged beta strategy that some investors
view as a hedge fund. That fund gained 17.6% in 2010.
Last year’s stellar showing was a big change
for Bridgewater, which won AR’s Management Firm of
the Year award in 2010. Dalio called the credit bubble in 2006,
enduring years of single-digit returns during the past decade.
But by 2008, caution was serving investors well: Pure Alpha
leapt ahead, gaining 8.7% when many hedge funds were in the
The numbers posted in 2010—which Bridgewater warns
is a once-in-20-years event—were particularly well
timed: Bridgewater, and Dalio, last year endured a flurry of
bad publicity that likened the hedge fund to a cult, given the
Tao of Dalio under which it operates. A working environment of
ego-demolishing criticism has made recruiting challenging.
Turnover is high; the new management committee includes five
people hired within the past two years. Moreover, the constant
questioning that Dalio calls the search for "radical truth"
creates a culture that is not only demoralizing but makes it
just plain difficult to get things done, according to former