When Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, announced his retirement in October, both he and the company he founded more than four decades ago considered the moment a century. concept.
Mr Dalio, 73, told his millions of followers on LinkedIn that he feels “great about the people” he has empowered. And one of Bridgewater’s two new executives, Nir Bar Dea, sent an enthusiastic letter to customers: “Transition from Ray is complete!”
But neither Mr. Dalio, who is known for his “radical transparency” creed, nor Bridgewater said at the time, or since, that he barely fought without fighting. His departure – prompted in part by controversial remarks he made on television about China’s human rights record – came after more than six months of frenzied backstage arguments over how much money he had to pay. his successors at the company are willing to pay to let the billionaire go. .
Finally, Mr. Dalio, with a estimated net worth valued at $19 billion, has agreed to relinquish his control of all major decisions at Bridgewater only if the company agrees to provide him with what could amount to billions of dollars in periodic payments over the coming years through a special class of shares.
These confidential arrangements are described by half a dozen current and former Bridgewater employees, who say they risk angering Mr. Dalio and possibly being sued by the company if they speak publicly. At an internal meeting last year during the heat of exit negotiations, Mr. Dalio described the hedge fund as his “property right,” according to one employee, and said he He wants to be properly compensated.
Mr. Dalio did not respond to requests for comment.
Bridgewater, which manages about $125 billion on behalf of public pension funds and sovereign wealth funds, is dealing with a situation that is becoming increasingly common across corporate America. The builders of companies large and small don’t seem to want to give up or be asked to back down when there’s uncertainty.
Recently, Marc Benioff, of tech giant Salesforce, returned to lead the single company he co-founded in 1999 and cut about 8,000 jobs. Howard Schultz, currently the third CEO of Starbucks, intention appeared about company-wide crushing efforts to unite store workers.
While executive suite battles no longer seem to be a daily concern for American workers, conflicts within upper management often create havoc within the ranks of the lower ranks. In the investment world, volatility can be such a distraction that it affects a fund’s performance, pressuring retirees and others who expect steady returns from investment managers. their private.
Many founders, even after selling the majority of their companies, retain power because they hold a special class of shares that give them more voting power than ordinary shares and allow they maintain control over the company’s decisions.
Mr. Dalio’s relationship with Bridgewater goes beyond that. He has served as the company’s chief executive officer, chief investment officer, and president — sometimes alone, sometimes with partners, and sometimes all at once.
At the same time, Mr. Dalio has publicly presented himself as a master of management, promoting an unusual workplace philosophy he calls “radical transparency”. The gist of it was that Bridgewater recorded most of the employee meetings and broadcast them widely, as proof that it was a place where hard truths could be openly told.
He has discuss how he ranks employees in categories like “willing to touch a nerve” and “quickly learn from mistakes”. Under his direction, Bridgewater spent millions of dollars on custom iPad software that let employees rate each other in real time on a scale of 1 to 10 in dozens of personality types.
In 2017, Mr. Dalio published “Principles”, a bestseller presenting leadership rules. (“Ready to ‘shoot the ones you love,’,” read one.) Since then, he has been a frequent speaker at TED conferences and is active on Twitter.
Mr. Dalio and Bridgewater launched his retirement plan more than a decade ago, in 2009, when he told the company and its clients that he would begin to transfer his responsibilities. That proves easier said than done. Bridgewater cycled through a place that seemed Endless group of future executives when Mr. Dalio found reasons to reject nearly all of them and vice versa.
A former co-CEO, Eileen Murray, sued the company for discrimination after she left in 2020, which was later settled out of court. She shared the role with David McCormick, who resigned more than a year ago to run the Pennsylvania Republican primaries for the Senate, which he lost.
During that time, Mr. Dalio sent mixed signals about whether he was staying or leaving, telling employees and investors that he would only leave when he was sure the right leader was in place. fit.
Mid-2018, Bridgewater said it will become a partnership as part of a long-term plan to break free of founder control. In theory, that should have turned the company into an entity controlled by top employees, not one man.
But Mr Dalio wasted little time telling colleagues he was not interested in a simple baton transfer, according to current and former employees. He approached dozens of top employees – at the time, Bridgewater had about 1,500 full-time employees – and told them they would have to buy his stock with their own money, some of the employees said. said.
Mr. Dalio offered to arrange 10-year loans for those who lacked the money to buy him back, according to two former employees. They said that if they refused, he would suggest that they consider leaving the company. However, even if he sells shares to his peers, reducing his ownership, the founder’s shares still help him stay in control.
Mr. Dalio has also not retreated from public opinion, which is often criticized.
In a CNBC interview in the fall of 2021, Dalio dismissed concerns about China’s human rights record, likening the government to a “strict parent.” (Bridgewater manages billions of dollars for companies partly owned by the Chinese government.)
“Should I invest in the United States for our own human rights leadership?” he asks.
The comments drew criticism from Washington, where Sen. Mitt Romney called them “sad moral decline.” Two customers called Bridgewater, asking if Mr. Dalio’s views represented the company’s views, two people with knowledge of the matter said. The company has never addressed the issue publicly, although Mr Dalio later said he spoke negligently.
Brouhaha doesn’t seem to soften his point. Inside Bridgewater, Mr. Dalio reaffirmed a rule that states that he must personally review and edit the company’s widely read economic bulletin, known as the Daily Observer, for any mentions. about China, lest others reduce his praise, one of the people said.
By then, although some at Bridgewater still loved Mr. Dalio and his history at the company, others were disappointed. That leaves Bar Dea, one of the co-CEOs, tasked with hastening negotiations to get his boss gone for good, the two with knowledge of the matter for know. A former major in the Israel Defense Forces and relatively new to the investment world, Mr Bar Dea, now 41, joined Bridgewater in 2015 to undertake economic research and quickly rose through the ranks. step.
In January 2022, he was elevated to the top position along with Mark Bertolini, the former chief executive of Aetna, although current and former employees say it was Bar Dea who mainly traded. with Mr. Dalio.
The back-and-forth between Mr Dalio and senior Bridgewater leaders lasted for much of 2022, with Mr Dalio insisting he would not simply hand over his lifetime job.
In the end, the two sides agreed on a steep price. Mr. Dalio will give up his title, take on a new role serves as “advisor to the CIO and investment committee,” and remains a member of the hedge fund’s board of directors, according to a Bridgewater announcement. (Last month, Bridgewater told clients that Mr. Bertolini would be stepping down from his role as co-CEO to become “a mentor to the CEO.”)
Mr. Dalio also received a special new class of personal stock, which the company informally calls “Ray’s stock”, which pays him the equivalent of a hefty dividend before any No one else in the company is paid, two people with knowledge of the matter said.
Based on those arrangements — as well as how long Mr. Dalio lived and Bridgewater survived — payouts could run into the billions of dollars.
Although Bridgewater delivered strong returns for investors in the first three quarters of 2022, the company’s flagship fund tumbled in the fourth quarter, just months after Mr. Dalio’s departure in October. fell another 7 percent in January, while stocks rallied.
That puts a lot of pressure on the company to turn things around. Bridgewater no longer posts properties under management on its website. From a peak of around $160 billion, that amount fell to about $125 billion at the end of last year, according to people familiar with the company.
In the meantime, Mr. Bar Dea has begun dismantling parts of Mr. Dalio’s estate. Bridgewater has removed many of its “Principles” and related ranking tools. Current employees say giving clear feedback to each other — a clear demonstration of Mr. Dalio’s “radical transparency” — is now optional.
However, some of Mr. Bar Dea’s changes hint at the old way of the hedge fund. He recently told staff that he was coming up with his own list of “Principles.”