The Guardian has reported on how Ray Dalio can now be described as the world’s most successful hedge fund manager:
Almost 40 years ago, a young Harvard graduate called Ray Dalio was trading futures at a brokerage called Shearson Hayden Stone. His boss was one Sandy Weill, who would go on to become famous as chairman and chief executive of Citigroup.
It was a promising start in finance. But the promise did not last long: Wall Street legend has it that after just a year in the job Dalio was sacked for taking a stripper to a client presentation.
Such a debut could have led to the rookie drifting off into obscurity – or just as easily have been the beginning of prolonged fame. Yet neither happened.
Instead, the son of a jazz musician sloped off and founded his own hedge fund, Bridgewater, from a two-bedroom apartment. It took three decades operating out of Westport, Connecticut before people outside the sector started to talk about Dalio once again.
The credit crisis was the trigger that propelled the money manager’s name back into Wall Street conversation, after providing him with the platform to outshine rivals and reap massive rewards.
This week the 62-year-old’s fortune was put at $10bn (£6.3bn) in Forbes’s latest list of billionaires. Last month he was lauded as the most successful hedge fund manager in history, after new rankings compiled by LCH Investments showed the $13.8bn that his Bridgewater Pure Alpha fund made in 2011 had propelled Dalio past the grandaddy of hedge fund investing, George Soros, in terms of returns to investors.
Since its 1975 inception the fund has booked gains of $35.8bn, while Soros’s Quantum fund (which has subsequently stopped managing funds for outside investors) made clients $31.2bn between 1973 and 2011. John Paulson’s now struggling Paulson & Co is in third place with $22.6bn of profits since 1994, despite its disastrous recent run.
But while Dalio’s fund is the world’s most successful (in total he has about $120bn under management), it is also the weirdest. His so-called “radically transparent” approach to investing involves filming internal meetings and allowing any employee the opportunity to openly criticise others – superiors and underlings alike.
Having made his first investment as a 12-year-old using money earned working as a caddy for local golfers, he has earned billions for himself. He frequently tops other hedge fund performance league tables as well as the LCH list and while he has not called the financial crisis completely correctly, the money manager has as good a record as anyone and has displayed undeniable moments of foresight.
In 1999, five months after the euro was introduced to world financial markets, with the single currency trading at $1.05, he said: “We are sceptical long-term about the ability of European politicians to manage financial policy by committee, but now is not a good time to short the euro.” (If you’re being picky, the euro traded at 83 cents 18 months later, but then rose steadily for the next eight years and now trades at around $1.30.)
And here he is in 2007, as credit markets tightened: “Hedge funds in general are unlikely to provide much diversification to help protect against poor performance of traditional markets.”
It all looks rather shrewd now. Just don’t follow his advice on client presentations.
Check out the original article in The Guardian