A Closer Look at a Pioneering Hedge Fund Manager

As a hedge fund manager, Ray Dalio has built Bridgewater Associates LP into the world’s largest macro hedge fund firm, with $122 billion in total assets. And he’s done so largely by betting against consensus and exploring markets that other investors either shunned or overlooked, according to a recent profile in Bloomberg Markets magazine, which included Dalio in its 50 Most Influential people in global finance.

Three of Bridgewater’s hedge funds placed in the top 100 of top-performing large funds in Bloomberg Market’s annual rankings. His Pure Alpha II fund posted a 38 percent return for the 10-month period ending in October, 2010.

But more than that, Dalio has built a unique company culture and a research-driven investing machine that spreads risk across many markets. The firm employs 1,200 professionals at its Westport, Connecticut headquarters, many of whom are devoted to generating reams of data and analyses on macroeconomic trends. For example, the Bloomberg articles mentions that in June, his team tracked the percentage of world gross domestic product generated by Western Europe, the U.S., Africa, China and other markets, all the way back to the 16th century, to determine long-term shifts in economic power.

Dalio and his team regularly brief central bankers as well as pensions and sovereign-wealth funds on their economic outlook. And they publish a newsletter, Bridgewater Daily Observations, on macroeconomic factors.

Equally important, Dalio has had a “transformational” impact on money management and other hedge funds managers. Back in the 1980s, when many money managers embraced simple asset allocation using stocks and bonds, Dalio reportedly spread his bets among more than 100 different markets, from Treasury yield curves to Australian dollars.

The Bloomberg profile delves into Dalio’s early upbringing in suburban Long Island, university career including an MBA at Harvard, and early years at Shearson Loeb Rhoades, a brokerage firm founded by Sandy Weill, who would later run Citigroup Inc. Like another giant organization with humble beginnings (think Apple computer), Dalio started Bridgewater in 1975 in a spare bedroom in his New York apartment.

Dalio’s philosophy toward managing people and creating an organization culture are legendary. Including his “principles” which are posted on the Bridgewater website. Among them: ” No. 24a: “Ask yourself whether you have earned the right to have an opinion.”

The Bloomberg article also explores Dalio’s current concerns about Europe and outlook for the U.S. economy, and is worth reading in its entirety.

What about you? Have you studied Dalio’s principles or familiarized yourself with this icon of the hedge fund industry? Add your comments below.

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