What’s next for Bridgewater as Ray Dalio hands over control?

Last week marked the final stage in the handover of control of hedge fund giant Bridgewater Associates, as billionaire founder Ray Dalio officially passed the baton over to the new management team. Dalio has called time after 47 years, having built the world’s biggest hedge fund at $150bn AUM.

Last week marked the final stage in the handover of control of hedge fund giant Bridgewater Associates, as billionaire founder Ray Dalio officially passed the baton over to the new management team. At 73, Dalio has called time after 47 years, having built the world’s biggest hedge fund, now with $150bn assets under management.

Dalio transferred his voting rights to the board at the end of September, relinquishing his position as one of three co-chief investment officers. He won’t be disappearing into the sunset though, as he takes on the role of ‘founder and CIO mentor’, and keeps a seat on the board.

Dalio, who rose to prominence after famously predicting the 2008 financial crisis, had previously stepped down as co-CEO in 2017, and chairman at the end of last year.

Next generation takes control from Ray Dalio

Ray Dalio was adamant he wouldn’t give up control of the company he founded all those years ago without the personnel in place to supersede him. As a result, he’s taken more than 10 years attempting to forge the right mix of investors and executives to successfully lead the firm — with seven different CEOs, or co-CEOs, passing through until today’s management team was finally put in place in January. Nir Bar Dia and Mark Bertolina are Co-CEOs, with Bob Prince and Greg Jensen the Co-CIOs.

Change has been in the pipeline for some time, following an underwhelming period for the firm’s returns in the 2010s, while in 2020, Bridgewater’s flagship Pure Alpha II fund fell 13%, in stark contrast to record gains from some of its rivals, as reported by Bloomberg. After an extensive review, the company realised that some of its methods, cultivated by Dalio, were actually hindering the collaborative, creative culture it was striving to achieve.

Looking ahead, a key component of the new generation, Greg Jensen, says the firm is now more likely to invest aggressively in technology and people, reports Bloomberg. And even if Dalio disagrees, the new board now holds the power over the hedge fund’s future direction and strategy. The board said in an email to employees, that Bridgewater is “well-positioned to continue to deliver for our clients as we work to have a lasting impact on the industry and on the world.”

Bridgewater’s flagship Pure Alpha II fund bounces back

After a disappointing return during the market downturn brought by the Covid-19 pandemic, Bridgewater’s Pure Alpha II fund has delivered an impressive performance this year, up 34.55% to the end of September, reports the Financial Times. A notable strategy has been the shorting of European stocks, according to ai-cio.com, with equities hit by issues including energy shortages as a consequence of the Russia-Ukraine war. In June, the fund reportedly doubled its short positions in European stocks, worth $10.5bn. Targets included German software maker SAP [SAP], and the French healthcare company, Sanofi [SAN].

Bridgewater’s latest regulatory 13F filing covering Q2 shows the firm upped its stakes in Walmart [WMT] and CVS Health [CVS], while reducing holdings in Alibaba [BABA], and disposing of its JD.com [JD] holding. The top three individual stock positions at the end of the second quarter, Procter & Gamble [PG], Johnson & Johnson [JNJ], and Coca-Cola [KO], comprised 10.3% of the portfolio.

The top three positions were all trimmed slightly in the second quarter, so that Procter & Gamble now makes up 4.11% of the portfolio, with Johnson & Johnson at 3.26%, and the iShares Core MSCI Emerging Markets ETF [IEMG], at 3.18%. While the SPDR S&P 500 Trust ETF [SPY] maintains a top five spot with 2.9% of the portfolio, Bridgewater has cut back on the position from 21 million shares in 2011, to 1.8 million shares. Coca-Cola was also sold during the quarter, but still holds the fifth-highest weighting at 2.9% of the fund. Bridgewater’s filing detailing its Q3 trades is due within 45 days of the end of September.