Less than a year after retiring, Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund, is threatening his former colleagues with what they worked hard for: his return.

Under the terms of his retirement agreement, Mr. Dalio, who left the company full-time in October, has the option to regain control of Bridgewater if its financial performance declines, according to five people with knowledge of the agreement.

The 74-year-old billionaire investor doesn’t necessarily want to come back to run the company he founded 50 years ago. Instead, he repeatedly raised the idea of ​​starting a new fund within Bridgewater that he hoped would help improve the company’s investment returns, four of the people said. Bridgewater’s main fund has been on a downward trend since Mr. Dalio’s retirement.

Some senior Bridgewater employees and board members, including chief executive Nir Bar Dea, whom Mr. Dalio appointed, have repeatedly told him that they will quit if he interferes. They fear Mr. Dalio could use the proposed fund to come back and reassert control, according to people briefed on internal deliberations but not authorized to speak publicly.

According to two people with knowledge of those conversations, Mr. Bar Dea told colleagues that he felt he had two jobs: running Bridgewater and running Mr. Dalio.

In a statement, Mr. Dalio said he had no intention of returning to Bridgewater to take over. Asked about the tensions in the company, he said: “We argued all the time about a lot of things and still loved each other – like an Italian family.” He declined to delve into the proposed fund.

Alan Fleischmann, a spokesman for Bridgewater, said the company is “grateful for all that Ray has contributed and continues to contribute as our founder, mentor and as a productive board member – hopefully for many years to come.” Mr. Bar Dea declined an interview.

Several current and former employees said the fragile state within the company reminded them of one of Mr. Dalio’s favorite expressions, which he used in countless meetings and other internal conversations leading up to his retirement.

“Take me out,” he told then-Bridgewater executives, according to people present at the meetings and documents reviewed by The New York Times, “and get what you deserve,” a threat that implied that without him the company would fall apart.

The internal conflict has become an unwelcome distraction at a company that manages $125 billion for pension funds, sovereign wealth funds and other major investors from around the world, including China and Australia – many of which Mr. Dalio has personally wooed.

This report on the tensions between the company and its founder is based on interviews with ten current and former Bridgewater employees and consultants who sought anonymity to speak freely about the tensions.

This year, Mr. Dalio brought the idea of ​​the new fund to Mr. Bar Dea, who presented it to Bridgewater’s board. Mr. Dalio, who is still director, was the only one to speak in favor of his own idea, according to three people with knowledge of the discussion. The board quickly dropped it. Since October, Mr. Dalio has refused to comment on board discussions or his suggestions to Mr. Bar Dea.

If Mr. Dalio gets his way, he will essentially compete with those to whom he has ceded control, leaving the company’s investors the choice of supporting either the Bridgewater founder’s ideas or those of his successors.

Bridgewater, which Mr. Dalio founded in his two-bedroom apartment, is a so-called macro investor, meaning he tries to predict global economic movements. In the last three months of 2022, the company’s main fund, Pure Alpha, lost around two-thirds of its annual profit. The company also lost money in the first half of 2023, said performance experts, even though the shares were experiencing a high phase. According to the filings, Bridgewater’s assets under management are down about 25 percent from their peak.

Mr. Dalio is known for his confrontational management approach called “Principles,” made famous in his best-selling autobiography of the same name. In keeping with this style, which he calls radical transparency, Mr. Dalio has in the past reprimanded Bridgewater employees through recorded court hearings and case studies and evaluated subordinate and senior employees using a complicated system of performance metrics.

This spring, he even made headlines for arguing with a neighbor over a roof extension on his family’s loft in New York’s SoHo neighborhood.

Mr Bar Dea, 42, is less well known. A former major in the Israeli military, he joined Bridgewater in 2015 and rose through its leadership ranks. He helped lead the company’s operations, which are separate from the company’s core business – the so-called “investment engine.” However, he formed allies with some of Mr. Dalio’s longtime deputies, including Bob Prince and Greg Jensen, both of whom held the title of co-chief investment officer alongside Mr. Dalio. Mr. Prince and Mr. Jensen are also billionaires thanks to their decades of work at hedge funds.

While Mr. Dalio was still in charge, the three men shared an increasingly pessimistic view of his investment acumen in countless conversations that were leaked to others not authorized to repeat them publicly. Bridgewater was flat in 2019 – a record year for stocks overall – and continued to plunge at the start of the pandemic, although the company left its forecasts unchanged.

About three years ago, the three men gave Mr. Dalio an incentive to quit, people familiar with the negotiations say. If he agreed to give up his titles as co-chief investment officer and CEO of Bridgewater, Mr. Prince and Mr. Jensen would take on additional personal debt to buy out Mr. Dalio’s controlling stake.

Taking on a particularly heavy burden, Mr. Prince ultimately agreed to pay Mr. Dalio enough to allow Mr. Prince to become Bridgewater’s largest owner, partly in exchange for Mr. Dalio giving up his formal investment roles at the firm in favor of a new one In an investment committee, his power would be diluted, the people said.

When the company posted impressive investment gains over a two-year period starting in mid-2020, the hedge fund told investors that it was because of this new investment committee, in which Mr. Dalio did not play a day-to-day role.

Mr. Fleischmann, the Bridgewater spokesman, said Bridgewater’s flagship fund has delivered an average annual return of 10 percent after fees in the three years since this new committee was formed.

Investment performance was not the only issue between Mr. Dalio and his successors. At some point during the long back-and-forth over his retirement package, he asked his former company to pay millions of dollars to license software he helped design that rates employees in a series of personality categories that Mr. Dalio himself helped design. said four people briefed on the request.

Mr Bar Dea rejected the request, calling it unjustified as few, if any, other companies had adopted the software. Mr. Bar Dea considered not giving Mr. Dalio an office after his retirement, although the founder eventually received one.

The higher price was to negotiate Mr. Dalio’s exit. The veteran investor, worth an estimated $19 billion, demanded billions more in payments to reduce his holdings. Bridgewater agreed to pay Mr. Dalio $1 billion in recurring annual payments as part of an exit package, The Times previously reported.

Even after Mr. Dalio and his successors agreed on that price, those involved in the negotiations weren’t sure whether Mr. Dalio would sign until that October morning, when he finally did.

Maureen Farrell contributed reporting.

Source : www.nytimes.com

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