Trader Fact File Ray Dalio

Ray Dalio is the founder of one of the largest hedge funds, Bridgewater Associates. He was part of Time’s 100 Most Influential People of the World list in 2012 and was also listed by Bloomberg as one of the 50 Most Influential People in the same year. As of February 2016, he is said to have a net worth of $15.6 billion, ranking as the 30th richest person in the US and the 69th richest person in the world a couple of years back.

Dalio’s public tax filing indicated that he was forming a philanthropic foundation, contributing more than $400 million to the fund and bringing its total assets to $842 million. He is also known for practicing Transcendental Meditation, which has led business leaders to achieve a super mind state of consciousness, for 40 years.

Career

Dalio graduated with a degree in finance from Long Island University and earned an MBA from Harvard Business School. Upon graduation, he worked on the New York Stock Exchange, investing primarily in commodity futures. Soon after, he became a futures trader at Shearson Hayden Stone then founded Bridgewater Associates in Connecticut in 1975.

Since then, the firm has made total gains of $35.8 billion, outranking George Soros’ Quantum Endowment Fund. In 2012, Bridgewater was listed as the largest hedge fund in the world with over $160 billion in assets under management as of 2014. He was able to predict the 2008 financial crisis in his essay called “How the Economic Machine Works: A Template for Understanding What Is Happening Now” where he details the economic model he used.

A few years later, Dalio released a publication called Principles in which he shares his investment philosophy and trading strategies. He shares more of his trade secrets and economic theories on YouTube.

Bridgewater Associates had mixed results in 2015, with its Pure Alpha fund up 4.7% net of fees and its Pure Alpha Major Markets fund up 10.6%. However, it’s All Weather fund with $70 billion under management is down 7%, following another loss in the previous year.

Facts

Dalio and his wife joined Warren Buffet’s Giving Pledge in which they vow to donate more than half of their fortune to charitable causes.

Dalio credits his investing success to his study of economic history, conducting in-depth analysis of periods of economic upheaval such as the Great Depression in the US and post-war Britain. He shared that he has simulated trading during those periods by reading daily news from those times and trading as though in real-time, writing down rules that would guide his strategies along the way.

Because of that, Bridgewater’s approach focuses on gathering data on credit and equity, allowing it to accurately predict the onset of the euro zone debt crisis in 2009. Interestingly enough, Dalio admits to being wrong roughly a third of the time but emphasizes that he has stayed successful due to proper management of risk during these wrong calls.

Achievements

Dalio was interested in the financial markets at a young age, assembling a stock portfolio worth thousands of dollars back when he was still a teenager. He continued to trade stocks in college and became interested in commodity futures while he was studying in CW Post College, a campus of Long Island University.

He had an excellent academic record in college, earning him admission to Harvard Business School later on. During his stint at the floor of the New York Stock Exchange, he was ahead of the curve in learning about commodity price fluctuations and the importance of exchange rates in a post Bretton-Woods Agreement era.

In the summer between his two years in Harvard, Dalio traded commodities at Merrill Lynch. It is said that he started Bridgewater Associates out of his own two-bedroom apartment, just before he met his wife Barbara Gabaldoni.

Bridgewater started off by advising a few corporate clients before this list grew along with its scope of investments. In 1991, the firm added a hedge fund called Pure Alpha, making it one of the first firms to establish distinct strategies for its portfolios. This flagship fund has had an average annual return of 18%.

In 2006, Bridgewater saw that total debt service in the US was exceeding its income, leading the fund to make major investments in Treasury bonds, gold, and the Japanese yen in anticipation of major deleveraging. Dalio even met with the US Treasury Secretary in Washington as he foresaw that the boom in mortgages could be followed by a crash in 2007. In the financial crisis that eventually swept the nation and caused other funds to chalk up huge losses, Bridgewater’s Pure Alpha fund managed to rake in 9% in gains. The fund then grew by $15 billion in 2010, more than the profits of top US companies such as Google, Amazon, Yahoo, and eBay combined.

In 2011, Dalio stepped down from his post as CEO of Bridgewater Associates and took more of a mentorship role. The fund’s client base consists mostly of institutional investors, foreign governments, central banks, university endowments, pension funds, and charitable institutions. Traders and policymakers all over the world are subscribed to Bridgewater’s newsletter called Daily Observations.

Sources:

https://en.wikipedia.org/wiki/Ray_Dalio

http://www.forbes.com/profile/ray-dalio/

http://www.achievement.org/autodoc/page/dal1bio-1

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