Illustration by II / Photo by Jason Alden/Bloomberg
Illustration by II / Photo by Jason Alden/Bloomberg

This content is from: Corner Office

Here’s What Ray Dalio Made in Bridgewater’s Impressive 2018

The founder of the world’s largest hedge fund firm was one of the top-earning managers of 2018 — and a strong contender to lead this year’s Rich List.

Ray Dalio’s Bridgewater Associates topped most other hedge funds last year when its flagship Pure Alpha strategy posted a 14.6 percent gain

That was good news for more than the firm’s stellar client list.

The 2018 return not only marked the strategy’s best performance since 2011: It also resulted in a mega-payday for Dalio, who personally netted a cool $2 billion, according to preliminary estimates from Institutional Investor. 

As a result, Dalio — who founded Westport, Connecticut-based Bridgewater, the world’s largest hedge fund firm, in 1975 — is likely to rank at or near the top of this year’s Rich List, Institutional Investor’s 18th-annual ranking of the 25 highest-earning hedge fund managers. Bridgewater declined to comment.

The full Rich List ranking won’t become official for a couple of months. However, last year’s stellar performance means Dalio is guaranteed to qualify for the ranking for the sixteenth time. He earned $1.3 billion in 2017 and $1.4 billion in 2016.

The estimated $2 billion Dalio appears to have earned last year works out to about $5.5 million per day — or $228,310 per hour if he worked 24/7 without sleep.

Dalio’s haul came from three sources: gains generated by the substantial amount of personal capital he has invested in his funds, his share of the firm’s management fees, and his share of the performance fee. This is the reward for the macro maven’s well-publicized bearishness and concerns about what he has described as an ever-widening wealth gap. 

For over a year, Dalio – who recently published a new book, Principles for Navigating Big Debt Crises – has been warning that we are past the top in the bond market and are in the “late cycle” phase of the short-term debt/business cycle. 

Late last year, Dalio publicly asserted that the current debt tightening cycle at this point “looks a lot like 1937,” adding, “we are in the late stages of both the short-term and long-term debt cycles.”

“We don’t know exactly how far we are from the top in the stock market and then the economy,” Dalio wrote nearly a year ago on LinkedIn, his favorite forum for communicating publicly. His concerns have not wavered – and perhaps have intensified since then.

“A lot of optimism about future earnings growth has been baked into equity valuations,” Bridgewater co-chief investment officer Bob Prince told the Financial Times in October. “But we are at a potential inflection point where the economy is moving from hot to mediocre.” 

In the wake of Donald Trump’s election as president, Dalio also warned about the dangers of populism, asserting that it was at its highest level since the 1930s.

Bridgewater’s Pure Alpha strategy has generated an annualized return of 12 percent since its inception in December 1991. But it posted a long streak of mediocre returns from 2012 through 2017, producing gains in the low-single-digits each year. 

Even so, Pure Alpha has made money in each of the past 18 years and only lost money in three years of its existence.

“Bridgewater’s significant positive returns in a year when most asset markets and most managers had negative returns is consistent with its style of management,” the firm recently told investors, according to a person who has seen the communication. 

The Pure Alpha strategy invests in more than 150 markets and is prepared to go long or short in each of the markets. Meanwhile, Bridgewater’s risk parity strategy, All Weather, lost a little over 6 percent last year, according to a private database.  

Although Dalio has hauled home huge sums of money, he has done the same for his longtime investors. Last year, LCH Investments – a London-based fund-of-funds firm – said Bridgewater had generated $49.7 billion in total net gains since the firm’s inception, more than any other hedge fund firm. This was before the nearly 15 percent gain Bridgewater’s flagship strategy generated in 2018.

Dalio has drawn considerable media scrutiny and public criticism for the corporate culture he has built at Bridgewater, which espouses the philosophy of radical truth. 

In September 2017 Dalio published Principles: Life and Work, a 500-page-plus version of the “Principles” document that he famously published on his firm’s website in 2011, offering rare insight into the firm’s unusual culture. The New York Times described it as “surprisingly moving.”

Dalio is also philanthropic. According to the website daliophilanthropies.net, the Dalio family’s foundation and private giving span a wide array of causes that include education, ocean exploration and awareness, environmental protection, meditation, mental health and wellness, healthcare, financial inclusion, child welfare and capacity building in China, and community activities and the arts.

Dalio, who enjoys music, hunting, and fishing, is a director emeritus of Grameen America, which helps boost women out of poverty. Last year, OceanX – founded by Dalio and Michael Bloomberg – announced a $185 million partnership aimed at supporting ocean protection and exploration.