Book Review: “Fund: Ray Dalio, Bridgewater Associates and The Unraveling of a Wall Street Legend”

In short, “The Fund” is an absolute rip-off of both, the legendary Macro Hedge Fund Bridgewater and its no less famous founder, Ray Dalio. There’s an old saying that you don’t want to know how the sausage is made, and in this case, that’s more than true for what happened behind the scenes at Bridgewater.

I have to admit that I never cared much for Bridgewater

and that I always found Dalio very strange when he spoke, but that he was such a psychopath as described in the book is quite a surprise.

Interestingly, it took Dalio a long time to get things going early in his career. His initial fame came from being one of the usual Perma Bears and predicting permanent doom in his newsletters until finally in a bad year he could say he predicted it. He also seemed to have married very rich and somehow got his fund going.

At first he also seemed to have some really good years that earned him a reputation and a fortune, but over time I turned into a horrible psychopath who terrorized everyone with his “principles”. His fixation on these “principles”, which he tried (unsuccessfully) to codify into some kind of AI/Expert system, also led to some pretty poor investment performance. Their flagship fund has underperformed a simple 60/40 stock/bond portfolio over the past 10-12 years. Interestingly, Dalio as a perma bear also did not see and react to the Covid crash.

Although not many details were given, Bridgewater seemed to use a realistically simple Quant model based on Momentum early on, which gave them a bit of an advantage early on, but they never seemed to develop it further.

My personal opinion is that Dalio and Bridgewater are not the only case of a famous hedge fund manager who is actually not that good an investor, but mainly a good trader. As we have seen recently with Bill Hwang (Archegos), Gabe Plotkin (Melvina) and Tiger Global, many of these hedge fund billionaires are not geniuses at all, but more like “One trick ponies” who often get rich at the expense of their clients.

As in other cases, people were attracted to Bridewater because of the high salaries, but every employee was in danger of being publicly “questioned” by the boss if he said the wrong thing. Employees carried around iPads with real-time rating systems to rate each other, which in many cases led to a doom loop as everyone tried not to be the next victim and instead tried to push someone else over the cliff. He sometimes hired very senior people in leadership roles (like Larry Culp, former CEO of Danaher, now GE), but those people usually left after a few months once they understood what they were getting into.

Since most of the employees also had nothing to do with investing, it was also hard to leave because they couldn’t make the same money elsewhere. Towards the end of his tenure at Bridgewater, Dalio became increasingly fixated on teaching his “principles” to anyone who would listen.

The book is a fascinating read about how things can get out of hand 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 actual investing, but this is perhaps because Bridgewater was not really about investing as such.

In any case, I can recommend the book as a pretty unique “behind the scenes” story of one of the most famous macro hedge funds of all time.

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