Home Hedge Funds Bridgewater’s chief says he has ‘rewired’ world’s largest hedge fund

Bridgewater’s chief says he has ‘rewired’ world’s largest hedge fund

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Bridgewater Associates’ new chief executive Nir Bar Dea said he had overhauled the hedge fund after just a year in charge, in a bid to restore the firm’s investment performance and mark a break from founder Ray Dalio.

“Everything has to get rewired,” Bar Dea told the Financial Times. “It’s like taking a brain and a heart out of a human and then planting a new brain and a new heart.”

Bar Dea’s rise to the top of Bridgewater comes at a crucial time for the business. The Connecticut-based firm, founded by Dalio, will be 50 years old next year and has for years dominated the sector as both the largest and best-performing hedge fund in the world.

But cracks have started to show in recent years with a drawn-out succession plan, high staff turnover and underwhelming performance.

Bar Dea, a former military officer who ascended to the top after less than a decade at the firm, has lived through the short tenure of multiple chief executives as Bridgewater has struggled to move on from Dalio.

Bar Dea, who was appointed sole CEO in March 2023 after previously sharing the job with Mark Bertolini, now wants to make it clear: Bridgewater is in the hands of a new generation and its decade-long transition away from the man who built the firm into a $160bn behemoth is over.

“We’re proud of Ray being a part of our history,” he said. “But it’s also true that Ray is . . . his own person and has his own set of goals. He does a lot of things outside of Bridgewater and that’s great. We want that for him. And then we need our independence.”

Bridgewater was in 2022 superseded by Ken Griffin’s Citadel as the best-performing hedge fund of all time. The firm’s flagship Pure Alpha fund sustained big losses at the end of 2022, then recorded one of its worst-ever years in 2023, after heavy losses in the final quarter left it down 7.6 per cent after fees.

Bar Dea acknowledged to investors in a video shared with clients that returns at the flagship fund were “less than what our clients expect and less than what we expect of ourselves”.

With the handover now completed, Bar Dea has set about trying to address staff turnover and investment returns. The Pure Alpha fund has staged a rebound this year and is up about 20 per cent, according to people familiar with the matter.

While little is known about how Bridgewater makes money, it is known on Wall Street for its unorthodox culture, with Dalio’s gospel of “radical transparency” long serving as its guiding philosophy.

Its culture has contributed to high turnover: former Apple executive Jon Rubinstein resigned as co-CEO just 10 months into his role after being deemed not to be a “cultural fit”.

Bar Dea accepts that Bridgewater’s pursuit of what he calls “absolute truth” is not for everyone.

“People almost self-select themselves to be in a place that puts truth above everything else,” he said. Bar Dea has previously said that the firm’s success is based on the “core idea of a group of people that want to be excellent so much that they’re going to be living in a state of uncomfortableness”.

Still, the 42-year-old maintains that there are key ways in which Bridgewater’s culture has changed under his leadership.

Feedback is predominantly given by junior employees to more senior ones, which is a “day and night change” from when he joined — back then “the flow of that feedback [was] almost entirely going from the top down”, he said.

Bar Dea hopes that Bridgewater’s pursuit of “absolute truth” will deliver market-beating performance for the hedge fund’s investors.

As part of a plan to make the fund more nimble during big market swings, Bar Dea has pledged to shrink the flagship fund by capping assets and returning money to investors. Pure Alpha’s assets will drop from $80bn to between $50bn and $60bn.

“We want to be the best, not the biggest,” said Bar Dea, who cut 100 jobs last year.

Bar Dea is focusing on two areas to reinvigorate performance. One is the funds, including Pure Alpha and All Weather, while the second is referred to internally as “portfolio solutions”, where Bridgewater works with clients to come up with new strategies that can improve their returns.

“We’re thinking about their biggest problems and creating solutions that honestly change their lives and add impact to the world,” said Bar Dea.

As part of the initiative, Bridgewater has been working on a macro fund that uses artificial intelligence, including large language models from companies such as OpenAI and Anthropic, to help it make investments.

Greg Jensen, one of three co-chief investment officers at the firm, who is leading the initiative, called it “unquestionably an experiment” at this point.

But Bar Dea described the fund as a first of its kind and said it would be one of the “biggest innovations [Bridgewater] has done over the years”.

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