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2013 U.S. Investment Management Awards — Manager Lifetime Achievement Award

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Manager Lifetime Achievement Award

For Raymond Dalio the key to success in the markets is to have an independent point of view. Few investors have been more independent — or more innovative — than the 63-year-old founder of Bridgewater Associates. Dalio, who grew up in a middle-class suburban neighborhood on New York’s Long Island and bought his first stock (Northeast Airlines) when he was 12 with money he made caddying, has created a unique culture at Bridgewater designed to encourage open debate — what he calls “thoughtful disagreement” — to discover the “timeless and universal truths” in the more than 100 markets in which the Westport, Connecticut–based firm trades. The culture is meant to promote collaboration and weed out overconfidence and arrogance.

“When you’re innovative, there is risk,” says Dalio, who has an MBA from Harvard Business School. “We deal with it by having everyone stress-testing each other’s ideas.”

The results speak for themselves. Since Dalio launched Bridgewater in 1975 out of his two-bedroom Manhattan apartment after being fired from Wall Street brokerage Shearson Hayden Stone, the firm has grown to approximately 1,300 employees and $150 billion in assets, including a whopping $84 billion in hedge funds. Investors in Bridgewater’s Pure Alpha hedge fund have enjoyed a 13.8 percent net annualized return since its 1991 inception. The firm’s All Weather fund, which is designed to make money during good and bad times, is up 9.5 percent a year since its launch in 1996.

Dalio’s impact on the asset management industry goes well beyond his own happy investors. In its early days Bridgewater was the first firm to manage currency overlay strategies, providing hedges for clients against adverse foreign exchange movements. It was also the first global inflation bond manager and advised the U.S. government on the creation of Treasury Inflation-Protected Securities. Bridgewater was the first manager to separate alpha (outperformance) from beta (market performance) and offer products based on each of them. The firm’s All Weather strategy, which offers a risk-based approach to asset allocation, has been copied by other managers and gained wide acceptance among institutional investors under the name “risk parity.”

Despite Bridgewater’s many innovations, Dalio says that investing — like everything in life — is actually very simple. He looks at every investment as a stream of future returns. The two main drivers of those returns are expected economic growth and expected inflation. At the same time, market pricing is simply a function of buying and selling. The way to determine the expected price of a stock or bond is to figure out who the buyers and sellers are and what their motivation is.

Dalio’s own motivation has more to do with finding truth than it does with making money. The self-made billionaire has signed on to Bill Gates’s Giving Pledge, agreeing to donate more than half of his assets during his lifetime. — Michael Peltz