Bridgewater Associates is an American investment management firm founded in 1975 by Ray Dalio. The company serves institutional clients including pension funds, endowments, foundations, foreign governments, and central banks. The firm uses such economic trends as inflation, currency exchange rates, and U.S. gross domestic product in their global macro investing style.
The company currently has 1,700 employees and 124.7 Billion in assets as of 2018.
The History of Bridgewater Associates
Bridgewater Associates was founded in 1975 by Ray Dalio from an office in his Manhattan apartment. At the time, the business exclusively advised corporate clients and the management of domestic and international currency and interest rate risks. Later, the firm’s boundaries were expanded and it began selling economic advice to governments and corporations. It then began publishing a paid subscription research report called the Daily Observations. In 1981, the company moved its offices from New York City to Connecticut.
The firm’s first accounts were funded by a US$5 million fixed-income investment through Hilda Ochoa-Brillembourg of World Bank in 1987. They then changed their focus from currency and interest rate management to global bonds and currencies for institutional investors in the mid-1980s. The company began gaining prominence as a currency advisor to institutional clients and also a developer of techniques for overlaying currencies. In 1990, the firm launched a hedge fund portfolio and began offering its currency overlay products to clients.
The firm developed a number of innovative investment strategies during the ’90s and also led the introduction of the separation of alpha and beta investments developing a strategy called “alpha overlay”. In 1991, the firm began selling portable alpha investment strategies by launching their Pure Alpha. The Pure Alpha was successful for the market’s downturn of 2000 to 2003 leading to the popularizing of hedge funds. The firm expanded its assets through its connections and introduced the global bond overlay program.
Bridgewater introduced its all-weather hedge fund in 1996 with the risk parity approach to portfolio management. This led to their assets under management growing from US$5 billion in the mid-1990s to US$38 billion by the year 2003. The firm was also ranked as the best performing global bond manager for all of the year 2000 and the five prior years by Pensions and Investments magazine. In 2002, it was named the World’s Best Money Manager by Nelson Information. It then garnered the Global Investor Awards for Excellence-Global Bonds award in 2003, along with the Global Pensions (magazine) Currency Overlay Manager of the Year award, and 2 “best in class” awards from the PlanSponsor Operations Survey the following year.
Bridgewater’s flagship, Pure Alpha, began moving all of its clients into alternative strategies in 2006 in order to maintain its investment strategy and enforce its capacity limit. In the same year, Bridgewater was honored with PlanSponsor Magazine’s Lifetime Achievement Award, the Global Pensions Magazine’s Currency Manager of the Year Award along with the Money Management Letters’ Public Pension Fund Award for Excellence and the Alternatives Manager of the Year award.
In 2007, the firm’s assets had reached 50 billion US dollars. In the same year, it began warning people of the dangers of excessive financial leverage. The total amount of losses to be expected would be about 839 billion US dollars. The issue was discussed with the U.S. Treasury Department. They tried to use the firm’s Pure Alpha Fund to spare its investors for most of the stock market’s meltdown expected but the strategy would prove unsuccessful. Economic growth went faster than anticipated thus the failure of their first solution. Their competition, The Dow Jones Industrial Average gained a significant amount whereas Bridgewater Associates gained a mere 2-4%.
A deleveraging and deflationary process (The d-process as called by Ray Dalio) was applied by the company in February 2009. In that same year, Bridgewater was named the largest hedge fund in the U.S. and it garnered the Alternative Investment News 7th Annual Hedge Fund Industry’s Lifetime Achievement award and PlanSponsor’s Hedge Fund Manager of the year award. The company’s assets grew during the faltering of the US gross domestic product in 2010 through their investments in treasury bonds leading to the total rise of the firm’s assets under management to more than US$100 billion. This was made possible due to the founding of the US$10 billion, Pure Alpha Major Markets fund.
After this, Bridgewater Associates garnered a number of awards including the Macro-Focused Hedge Fund Firm of the Year award and the aiCIO Hedge Fund Industry Innovation Award. Along with the awards, Absolute Return + Alpha (AR) ranked the company number one in its Hedge Fund Report Card and Billion Dollar Club categories. In September 2017, the firm announced plans to launch an investment fund in China with the Chinese government’s approval.
Bridgewater Associates’ Location
The firm’s headquarters in 1981 was located 50 miles north of New York City to Wilton, Connecticut but later moved again to a larger area in Westport, Connecticut in the late ’90s. The area covered by the headquarters grew as the company became bigger and at the time, it became the sole resident at the 22-acre campus.
Bridgewater Associates Cultures
Employees:
From 2003 to 2011, the total number of employees hired at Bridgewater Associates rose from 100 to about 1200. The company hires analysts and employees right out of college and from the annual pool of graduates from Ivy League Schools. Employees are brought to work in a bus (a bus considered to be quite fancy) from Manhattan to their offices in Westport. The founder, Ray Dalio, stepped down as the company’s CEO to take on the role of a mentor. Most of the new recruits of the company usually quit in their first few years but those who remain are greatly compensated with Dalio helping to pay for any employees that wish to learn the Transcendental Meditation technique.
Corporate:
After the firm’s employees began growing, Ray Dalio created the handbook called Principles and distributed it to all employees. The book is part self-help book, part management manual, and part treatise on the mechanics of natural selection as they function in a business setting. The firm encourages its employees to be assertive, and embrace disagreements and mistakes in order to stimulate learning and progress. The company is well known for promoting total honesty and accountability throughout its ranks.
Meetings in the company are recorded and can be viewed by any employee as long as the meeting isn’t proprietary. The intense cultures going on inside the walls of the firm are commonly seen as a cult but Ray Dalio insists that the firm houses a “dedicated community”. There have however been complaints from a few employees stating that the hedge fund was like a “cauldron of fear and intimidation.”