“The Fund” is in short an absolute tear-down of both, the legendary Macro Hedge Fund Bridgewater and its equally famous founder Ray Dalio. There is an old saying that you don’ want to know how the sausage is made and in this case this is more than fitting to what happened behind the scenes at Bridgewater.
I have to admit that I never cared that much about Bridgewater (*) and that I found Dalio always very strange when he was speaking, but that he was such a Psychopath as it is described in the book is quite a surprise.
Interestingly, Dalio in the beginning of his carreer needed a long time before he got anything off the ground. His initial fame came that he was one of the usal Perma Bears, predicting permanent doom in his newsletters until he finally could say in a bad year that he predicted it. He also seemed to have married very rich and somehow then got his fund going.
Inititally, he also seemed to have some really good years which earned him the reputation and brought in assets, but over time je became a horrible psychopath who terrorized everyone with his “principles”. His fixation on these “principles” that he (unsuccessfully) tried to codify into some kind of AI/Expert system also led to a pretty bad investment performance. Their flagship fund underperformed a simple 60/40 Stock/bond portfolio over the past 10-12 years. Interestingly as a perma bear, Dalio also failed to see and react on the Covid crash.
Although not many deatails were given, Bridgewater seemed to have used a realtively simple Quant model based on Momentum early on, which in the beginning gave them some edge, but they never seemed to have developed that further.
My personal opinion is that Dalio and Bridgewater is not the only case of a famous Hedge Fund Manager who actually is not such a good investor but mainly a good salesman. As we have recently seen with Bill Hwang (Archegos) Gabe Plotkin (Melvin) and Tiger Global, a lot of these Hedge Fund Billionaires are not geniuses at all but more like “One trick ponys” that often manage to enrich themselves at the cost of their clients.
As in other cases, people were drawn to Bridewater because of the high salaries, but every employee was at risk to get publicly “questioned” by the boss if he or she said soemthing wrong. Employees were carrying around Ipads with real time rating systems to rate each other which in many cases led to doom loops as everyone tried not to be the next victim and instead tried to push someone else over the cliff. Sometimes he hired very senior people into senior roles (liek Larry Culp, fromer CEO of Danaher, now GE), but these people ususally left after a few months once they understood what they got into.
As most employees also had nothing to do with investing, it was also hard to leave because they would not been able to make the same amount of money elsewhere. Towards the end of his time at Bridgewater, Dalio became more and more fixated on teaching his “principles” to each and anyone who would listen.
The book is a fasciniating read on how out of control things can get in a company, where the founder has all the power and is not held accountable by an independent board or similar bodies.
The only negative point about the book is that there is relatively little to read about the actual investing, but this is maybe due to the fact that Bridgewater as such was not really about investing.
In any case I can recommend the book as a pretty unique “behind the curtain” story on one of the most famous Macro Hedge funds of all times.
*) for some reason, I must have subscribed to Ray Dalio at some point in time because I still find some Emails from Dalio in my Spam folder from time to time
