Hedge Fund Market Wizards

Chapter 2

Ray Dalio

The Man Who Loves Mistakes

Ray Dalio is the founder, CIO, former CEO, and current mentor (the title he assumed in July 2011) of Bridgewater, the world’s largest hedge fund. As of December 2011, Bridgewater had $120 billion in assets under management and more than 1,400 employees. Bridgewater is unique in many ways beyond its size:

• It has made more money for its investors than any other hedge fund in history—an estimated $50 billion over the past 20 years.
• Bridgewater’s flagship fund has a near zero correlation to traditional markets.
• Bridgewater’s flagship fund also has a very low correlation to other hedge funds.
• The flagship fund uses the relatively rare combination of a fundamentally based systematic approach. (Most hedge funds that are fundamentally based use a discretionary approach, and most hedge funds that use systematic approaches base them on technical input.)
• Bridgewater fosters an unusual corporate culture that encourages criticism among employees, regardless of rank.
• Virtually all of Bridgewater’s business is institutional (95 percent institutional, 5 percent fund of funds).
• Bridgewater is among a small minority of funds with a 20-year track record.
• Bridgewater was the first hedge fund to create separate alpha and beta funds that could be combined in any mix desired by the client.

The track record for Bridgewater’s flagship strategy encompasses both managed accounts and funds, with each trading at multiple target volatility levels and multiple ...