Bridgewater Associates
Encyclopedia
Bridgewater Associates is an American investment management
firm founded by Ray Dalio
in 1975 and is reported to be the world's largest hedge fund
company with $122 billion in assets under management
. The company has 270 clients including pension fund
s, endowments
, foundations, foreign government
s and central bank
s. Unlike many hedge funds, the firm serves institutional clients exclusively.
The company utilizes a global macro investing style that adapts to changes in economic trends, such as inflation, currency exchange rates, and U.S. gross domestic product. Bridgewater Associates began as an institutional investment advisory service, later graduated to institutional investing and in 1996 pioneered the Risk parity
investment approach with its All Weather hedge fund.
In 1981 the company moved its headquarters from New York City
to Westport, Connecticut
and currently has 1,200 employees. It embraces a unique corporate culture that encourages employees to fulfill the company's goals via corporate transparency and the elimination of the decision making hierarchy.
product in 1996. The company’s Daily Observations research is read by leaders of central banks and managers of pension funds around the world and its flagship fund, Pure Alpha, has averaged a 15% annual gain over the past 18 years. According to Financial News
, the company was the fastest growing asset manager from 2000 until 2005, when it stopped accepting new accounts to focus on refining its strategies. Its assets under management have increased by 25% to 40% each year during the last decade with employees increasing elevenfold since the year 2000.
and McDonalds.
Early on the company began publishing a paid subscription research report called the Daily Observations which inspired McDonald’s Corp. and its main supplier to take on Bridgewater Associates as an advisor in the early 1980s. The Banks of MidAmerica were another early client of the company and the director of the bank’s treasury department, Bob Prince, joined Bridgewater Associates as co-CIO. In 1981, the company moved its offices from New York City to Connecticut.
The company’s first account was funded by a $5 million fixed-income, investment through Hilda Ochoa-Brillembourg
of World Bank
in 1987. In the mid 1980s, the firm changed its business focus from currency and interest rate management to global bonds and currencies for institutional investor
s. Starting out as a fixed income and currency adviser to institutional clients, the company gradually gained a reputation as a currency trader and a developer of techniques for overlying currencies.
In 1990 it launched a hedge fund portfolio using monies from Kodak and Loews Corporation
and began formally offering its currency overlay
products to its clients.
s, currency overlay, emerging market debt, global bonds and “super-long duration bonds for liability management”. The firm also "pioneered the separation of alpha and beta and developed a strategy called "alpha overlay" which involved a portfolio of "20 uncorrelated return streams" leveraged for risk or return and overlaid with cash or a market benchmark.
In June 1991, the firm launched its Pure Alpha fund and began to market portable alpha
investment strategies. The Pure Alpha fund did well during the market’s downturn of 2000 to 2003 and, as hedge funds became more popular, Bridgewater Associates expanded its assets through its connections with various underfunded pension funds, some of whom were already clients.
In 1992 the firm introduced its global bond overlay program. In 1995, the company participated in discussions at the US Treasury and "advised" federal government on the development of "inflation-indexed bonds".
In 1996, the company launched its All Weather hedge fund and pioneered the Risk parity
approach to portfolio management. The firms assets under management grew from $5 billion in the mid 1990's to $38 billion by the year 2003.
In June 2000, the firm was ranked as the best performing global bond manager for that year and the prior five years by Pensions & Investments magazine. In 2002, the company was ranked by Nelson Information, as World's Best Money Manager in recognition of the 16.3% return on its International Fixed Income program.
In 2003, the firm received the Global Investor Awards for Excellence-Global Bonds award. In 2004 the company received the Global Pensions (magazine)
, Currency Overlay Manager of the Year award, the Asian Investor, Best in Global Fixed Income award and 5 "best in class" awards from the PlanSponsor Operations Survey.
In 2006 the company’s flagship, Pure Alpha fund, began “returning money to its institutional clients in order to keep the strategy within its strictly enforced capacity limit” and began moving all of its clients into alternative strategies (Pure Alpha and All Weather) thereby eliminating its traditional strategy approach. It was honored by PlanSponsor Magazine with the Lifetime Achievement Award and the Global Pensions magazine Currency Manager of the Year award and the Money Management Letters, Public Pension Fund Award for Excellence and the Alternatives Manager of the Year award.
In 2007, the firms total assets under management grew to $150 billion (from $33 billion in the year 2000) and it warned the public about "the dangers of excessive financial leverage". In July of that year the company began focusing on the “crazy lending and leveraging practices” in the banking industry. The company’s researchers reviewed the public accounts of most of the major financial institutions around the globe and found that estimated future losses due to bad debts totaled $839 billion. In December, these conclusions were reported to the U.S. Treasury Department when founder, Dalio met with U.S. Treasury Secretary staff and other White House
economic advisers.
Bridgewater's Pure Alpha fund "spared its investors" from most of the stock market's "meltdown" in 2008. However, this strategy was not successful in 2009 when economic growth responded faster than anticipated and the Dow increased by 19% while the company’s Pure Alpha fund reportedly gained a mere 2% to 4%. Senator John McCain
visited the company in 2008 and addressed employees.
In 2009, Bridgewater Associates' founder was credited with coining the term "D-Process" to describe the deleveraging
and deflationary process of the subprime mortgage industry and distinguishing it from a recession
and completed the transformation of its "100% institutional clients" away from traditional strategies. That year the company was termed the largest hedge fund in the U.S. and it received the Alternative Investment News 7th Annual Hedge Fund Industry's Lifetime Achievement award and PlanSponsor's Hedge Fund Manager of the year award.
In 2010, when the U.S. Gross domestic product
faltered, the firm had significant gains on their investments in Treasury bonds and other securities. In November the firm founded the $10 billion, Pure Alpha Major Markets fund, and brought the company’s total assets under management to more than $100 billion.
In 2011 the firm received several honors. It was ranked number one on Institutional Investor
's "world's top 100 hedge funds" list. It received the Macro-Focused Hedge Fund Firm of the Year award and the aiCIO
Hedge Fund Industry Innovation Award. Absolute Return + Alpha
(AR) ranked the company number one in its Hedge Fund Report Card and Billion Dollar Club categories.
and standard market risk, and 2) Alpha (investment)
s whose goal is to generate higher returns that are uncorrelated to the general market and are tactical and actively managed. The principle of separating alpha and beta investments was introduced by the founder of Bridgewater Associates in 1990 and gained the recognition of other equity managers beginning in the year 2000.The firm is reported to be the first hedge fund manager to separate alpha and beta investment strategies and offer dedicated investment funds for each.
These tools provide an investing system that merges the traditional investment principles of diversification with a hedge funds' unique ability to invest in, or against, a multitude of markets around the world.
, called the Daily Observations which is read by investors worldwide on a subscription basis.
The All Weather fund contains more than $46 billion and is one of the largest funds in the U.S. In April 2009, after the collapse of Lehman Brothers
the fund moved into "safe portfolio" mode which included nominal and inflation-linked bonds and gold instead of equities, emerging market debt spreads, commodities and corporate spreads. The fund is reported to contain 40% inflation-linked bonds, 30% Treasury bills, 20% Treasury bonds and 10% gold.
that has been described as “packed with charts and data” and is the flagship product and service offered by the company. It is reportedly read, on a subscription basis, by clients, leaders of central banks and managers of pension funds around the world. It is the centerpiece of the company’s outreach program and reported to be “one of the most widely forwarded pieces of market analysis” in the industry. It has been characterized as comprehensive with some editions being up to 43 pages in length. According to the company these daily reports are read by “members of the U.S. Treasury, [and] the Executive Office of the President of the United States”.
, to Wilton, CT and in the late 1990s moved to a larger office space, on a corporate campus, in Westport, CT. As the company continued to expand, it became the sole tenant at the 22 acre Westport campus. The firm’s headquarters is described as retreat-like and is surrounded by the trees of a former nature reserve
. The campus contains three buildings, designed by the architect Bruce Campbell Graham, which are made of glass and mid-century fieldstone. Since 2000 its staff has grown from 100 to 1200 employees and the firm has taken office space in three additional buildings in the area. The company’s headquarters have been compared to Google
’s in the sense that both are located away from their respective industry centers.
schools such as Harvard University
, Princeton University
and Dartmouth College
. Employees are transported daily in a "fancy" bus that ferries them from Manhattan
to the company's Westport offices. According to the company, many new employees "self-select out" and "about a quarter of all new hires" either quit or are let go within the first two years. Those that remain are reported to receive "generous" compensation and form bonds with fellow employees that are "like family" and company's founder helps to pay for any employees that wish to learn the Transcendental Meditation technique
.
Dalio, the company founder, relinquished his chief executive officer
(CEO) title in July 2011 to take on the role of "mentor". The company now has three co-CEO's; Greg Jensen, Eileen Murray
and David McCormick; the former undersecretary of the Treasury Department. The company has three co-CIO's (chief investment officers); Dalio, Bob Prince and Jensen (who is also co-CEO). Jensen, the 37 year old, co-CEO, oversees the research programs at the firm and came to the company as a Dartmouth College intern about 15 years ago.
Britt Harris
, formerly of Verizon Investment Management, joined Bridgewater Associates as co-chief executive in November 2004 but left six months later. According to Dalio, the cultural fit was a problem, but stated that Harris "is a superstar, with an absolutely fabulous character".
A 2011 article in New York Magazine described the company as the "largest and weirdest hedge fund" because of its unique corporate culture. The company encourages employees to do "whatever it takes to make the company great" and emphasizes transparency and openness in its decision making processes.
In spite of its critics, the company insists that the firm is a dedicated “community” and not a cult. An article in the New Yorker points out that "the word cult clearly has connotations that don’t apply to an enterprise staffed by highly paid employees who can quit at any moment.” However, critics point out that the headquarters is located away from other financial institutions and "headed by a strong-willed leader with a unique vocabulary." One client of the firm, Bob Jacksha, chief executive officer of the New Mexico Educational Retirement Board, said: "Every investment manager has its own culture and some are more unique than others"
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
firm founded by Ray Dalio
Ray Dalio
Ray Dalio is an American businessman and founder of Bridgewater Associates.-Early Life and Education:...
in 1975 and is reported to be the world's largest hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
company with $122 billion in assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
. The company has 270 clients including pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s, endowments
Financial endowment
A financial endowment is a transfer of money or property donated to an institution. The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust....
, foundations, foreign government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
s and central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
s. Unlike many hedge funds, the firm serves institutional clients exclusively.
The company utilizes a global macro investing style that adapts to changes in economic trends, such as inflation, currency exchange rates, and U.S. gross domestic product. Bridgewater Associates began as an institutional investment advisory service, later graduated to institutional investing and in 1996 pioneered the Risk parity
Risk parity
Risk parity is an alternative approach to investment portfolio management which focuses on allocation of risk rather than allocation of capital...
investment approach with its All Weather hedge fund.
In 1981 the company moved its headquarters from New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
to Westport, Connecticut
Westport, Connecticut
-Neighborhoods:* Saugatuck – around the Westport railroad station near the southwestern corner of the town – a built-up area with some restaurants, stores and offices....
and currently has 1,200 employees. It embraces a unique corporate culture that encourages employees to fulfill the company's goals via corporate transparency and the elimination of the decision making hierarchy.
History
The history of Bridgewater Associates is characterized by growth and the pioneering of industry strategies such as: currency overlay in the 1980s, the separation of alpha and beta strategies in the early 1990s, the creation of absolute return products, like the global alpha fund in 1991 and the All Weather, risk parityRisk parity
Risk parity is an alternative approach to investment portfolio management which focuses on allocation of risk rather than allocation of capital...
product in 1996. The company’s Daily Observations research is read by leaders of central banks and managers of pension funds around the world and its flagship fund, Pure Alpha, has averaged a 15% annual gain over the past 18 years. According to Financial News
Financial News
The Financial News, is a financial newspaper and news website published in London. It is a weekly investment banking, fund management and securities industries newspaper, published by eFinancial News Limited. Financial News was founded in 1996....
, the company was the fastest growing asset manager from 2000 until 2005, when it stopped accepting new accounts to focus on refining its strategies. Its assets under management have increased by 25% to 40% each year during the last decade with employees increasing elevenfold since the year 2000.
1975-1990: Consulting, research, money management
Bridgewater Associates was founded by Ray Dalio in 1975 from an office in his Manhattan apartment and at that time the business consisted exclusively of advising corporate clients. Services included the management of domestic and international currency and interest rate risks. The firm later changed its emphasis and began selling economic advice to governments and corporations such as NabiscoNabisco
Nabisco is an American brand of cookies and snacks. Headquartered in East Hanover, New Jersey, the company is a subsidiary of Illinois-based Kraft Foods. Nabisco's plant in Chicago, a production facility at 7300 S...
and McDonalds.
Early on the company began publishing a paid subscription research report called the Daily Observations which inspired McDonald’s Corp. and its main supplier to take on Bridgewater Associates as an advisor in the early 1980s. The Banks of MidAmerica were another early client of the company and the director of the bank’s treasury department, Bob Prince, joined Bridgewater Associates as co-CIO. In 1981, the company moved its offices from New York City to Connecticut.
The company’s first account was funded by a $5 million fixed-income, investment through Hilda Ochoa-Brillembourg
Hilda Ochoa-Brillembourg
Hilda Ochoa-Brillembourg is a Venezuelan-born business woman and the current president and Chief Executive Officer of Strategic Investment Group which she founded in 1987...
of World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
in 1987. In the mid 1980s, the firm changed its business focus from currency and interest rate management to global bonds and currencies for institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s. Starting out as a fixed income and currency adviser to institutional clients, the company gradually gained a reputation as a currency trader and a developer of techniques for overlying currencies.
In 1990 it launched a hedge fund portfolio using monies from Kodak and Loews Corporation
Loews Corporation
Loews Corporation is a holding company run by the Tisch Family whose subsidiaries are engaged in the following lines of business:*property and casualty insurance...
and began formally offering its currency overlay
Currency Overlay
Currency overlay is a financial trading strategy or method to manage international currency exposures. In the case of large institutional clients such as pension funds and endowments, this is often done by specialist firms...
products to its clients.
1991-present: Pure Alpha, All Weather, Pure Alpha Major Markets
Bridgewater Associates developed several "innovative investment strategies" during the 1990s such as inflation-indexed bondInflation-indexed bond
Inflation-indexed bonds are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. The first known inflation-indexed bond was issued by the Massachusetts Bay Company in 1780...
s, currency overlay, emerging market debt, global bonds and “super-long duration bonds for liability management”. The firm also "pioneered the separation of alpha and beta and developed a strategy called "alpha overlay" which involved a portfolio of "20 uncorrelated return streams" leveraged for risk or return and overlaid with cash or a market benchmark.
In June 1991, the firm launched its Pure Alpha fund and began to market portable alpha
Portable Alpha
Portable alpha is the return of an investment portfolio with zero market risk . Being independent of both the direction and the magnitude of the market's movements, it represents the manager's skill in selecting investments...
investment strategies. The Pure Alpha fund did well during the market’s downturn of 2000 to 2003 and, as hedge funds became more popular, Bridgewater Associates expanded its assets through its connections with various underfunded pension funds, some of whom were already clients.
In 1992 the firm introduced its global bond overlay program. In 1995, the company participated in discussions at the US Treasury and "advised" federal government on the development of "inflation-indexed bonds".
In 1996, the company launched its All Weather hedge fund and pioneered the Risk parity
Risk parity
Risk parity is an alternative approach to investment portfolio management which focuses on allocation of risk rather than allocation of capital...
approach to portfolio management. The firms assets under management grew from $5 billion in the mid 1990's to $38 billion by the year 2003.
In June 2000, the firm was ranked as the best performing global bond manager for that year and the prior five years by Pensions & Investments magazine. In 2002, the company was ranked by Nelson Information, as World's Best Money Manager in recognition of the 16.3% return on its International Fixed Income program.
In 2003, the firm received the Global Investor Awards for Excellence-Global Bonds award. In 2004 the company received the Global Pensions (magazine)
Global Pensions (magazine)
Global Pensions magazine is a monthly Incisive Media publication that servers the institutional pensions industry and focuses on managing risk and investment returns.It is currently edited by Raquel Pichardo-Allison.-External links:*...
, Currency Overlay Manager of the Year award, the Asian Investor, Best in Global Fixed Income award and 5 "best in class" awards from the PlanSponsor Operations Survey.
In 2006 the company’s flagship, Pure Alpha fund, began “returning money to its institutional clients in order to keep the strategy within its strictly enforced capacity limit” and began moving all of its clients into alternative strategies (Pure Alpha and All Weather) thereby eliminating its traditional strategy approach. It was honored by PlanSponsor Magazine with the Lifetime Achievement Award and the Global Pensions magazine Currency Manager of the Year award and the Money Management Letters, Public Pension Fund Award for Excellence and the Alternatives Manager of the Year award.
In 2007, the firms total assets under management grew to $150 billion (from $33 billion in the year 2000) and it warned the public about "the dangers of excessive financial leverage". In July of that year the company began focusing on the “crazy lending and leveraging practices” in the banking industry. The company’s researchers reviewed the public accounts of most of the major financial institutions around the globe and found that estimated future losses due to bad debts totaled $839 billion. In December, these conclusions were reported to the U.S. Treasury Department when founder, Dalio met with U.S. Treasury Secretary staff and other White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
economic advisers.
Bridgewater's Pure Alpha fund "spared its investors" from most of the stock market's "meltdown" in 2008. However, this strategy was not successful in 2009 when economic growth responded faster than anticipated and the Dow increased by 19% while the company’s Pure Alpha fund reportedly gained a mere 2% to 4%. Senator John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
visited the company in 2008 and addressed employees.
In 2009, Bridgewater Associates' founder was credited with coining the term "D-Process" to describe the deleveraging
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
and deflationary process of the subprime mortgage industry and distinguishing it from a recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
and completed the transformation of its "100% institutional clients" away from traditional strategies. That year the company was termed the largest hedge fund in the U.S. and it received the Alternative Investment News 7th Annual Hedge Fund Industry's Lifetime Achievement award and PlanSponsor's Hedge Fund Manager of the year award.
In 2010, when the U.S. Gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
faltered, the firm had significant gains on their investments in Treasury bonds and other securities. In November the firm founded the $10 billion, Pure Alpha Major Markets fund, and brought the company’s total assets under management to more than $100 billion.
In 2011 the firm received several honors. It was ranked number one on Institutional Investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
's "world's top 100 hedge funds" list. It received the Macro-Focused Hedge Fund Firm of the Year award and the aiCIO
AiCIO
aiCIO is an English-language international finance magazine owned by the publishing firm Asset International. In 2009, the magazine was honored with Folio's Silver Ozzie Award for "Best Design New Magazine, B-to-B." In 2011, the magazine was a finalist for the Jesse H...
Hedge Fund Industry Innovation Award. Absolute Return + Alpha
Absolute Return + Alpha
-Description:Absolute Return + Alpha was launched in September 2009, as a subsidiary of financial publisher Euromoney Institutional Investor. AR was formed when two magazines, Alpha and Absolute Return were combined. The magazine publishes both online and print content...
(AR) ranked the company number one in its Hedge Fund Report Card and Billion Dollar Club categories.
Investment philosophy
Bridgewater Associates considers itself a global macro, investment firm that uses "quantitative strategies" to identify investments while attempting to avoid over-reliance on historical models that may create over-optimised computer strategies that don't allow for unexpected changes in the markets. Its goal is to structure portfolios in a way that creates consistent and uncorrelated investment returns by building investments based on risk allocations, rather than asset allocations. Additionally, the company is reported to be unique in that it only accepts funds from institutional clients such as pension funds, foundations, endowments, and central banks rather than private investors.Separation of Alpha and Beta
The company divides its investments into two basic categories: 1) Beta (investment)s whose returns are generated through passive managementPassive management
Passive management is a financial strategy in which an investor invests in accordance with a pre-determined strategy that doesn't entail any forecasting...
and standard market risk, and 2) Alpha (investment)
Alpha (investment)
Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances...
s whose goal is to generate higher returns that are uncorrelated to the general market and are tactical and actively managed. The principle of separating alpha and beta investments was introduced by the founder of Bridgewater Associates in 1990 and gained the recognition of other equity managers beginning in the year 2000.The firm is reported to be the first hedge fund manager to separate alpha and beta investment strategies and offer dedicated investment funds for each.
Systematic diversification
The company is reported to make its investment decisions using a fundamental and systematic process to evaluate global market trends and analyze them on the basis of a predetermined set of investment criteria. The firm also aims to merge traditional asset allocation with risk allocation and a wide variety of global investment vehicles including bonds, stocks, currencies and commodities. To guide its investment strategies the company’s top executives have compiled hundreds of “decision rules” which are the financial corollary to the firm’s employee handbook, Principles, and these investment guidelines have been incorporated into the firm’s computers analysis.These tools provide an investing system that merges the traditional investment principles of diversification with a hedge funds' unique ability to invest in, or against, a multitude of markets around the world.
Products
The firm offers three hedge funds to their clients: the Pure Alpha fund, the All Weather fund and the Pure Alpha Major Markets fund. It also publishes a signature white paperWhite paper
A white paper is an authoritative report or guide that helps solve a problem. White papers are used to educate readers and help people make decisions, and are often requested and used in politics, policy, business, and technical fields. In commercial use, the term has also come to refer to...
, called the Daily Observations which is read by investors worldwide on a subscription basis.
Pure Alpha
Bridgewater Associates launched its flagship fund, Pure Alpha, in 1989. The fund is described as a "diversified alpha source" that the company combines with benchmarks to maximum returns across a diverse group of asset classes. It was designed to balance risk amongst a variety of non-correlated assets through active management. It consists of 15 or more, uncorrelated investment return streams with 30 or 40 simultaneous trading positions in bonds, currencies, stock indexes and commodities to avoid affecting prices by concentrating funds in a single area. After placing some of the company's excess cash into the Pure Alpha hedge fund to increase its “investing discretion” the fund remained stable during the market downturn of 2000 to 2003. The fund was closed to new investors in 2006 when it reached its pre-determined, maximum funds level. As of 2011, the fund is reported to have lost money in only three of its 20 year existence and had an average annualized return of 18 percent. The success of Pure Alpha is reported to be a result of the company's change to a portable-alpha-only management style which allows portfolio managers to trade freely among asset classes.All Weather
A second fund, called All Weather, was launched in 1996 and featured low fees, global inflation-linked bonds and global fixed income exposures. The fund began as the founder’s personal trust fund and was subsequently opened to clients. The fund seeks to provide, "high, risk adjusted returns" during all market conditions and at least match the return of the overall market.The All Weather fund contains more than $46 billion and is one of the largest funds in the U.S. In April 2009, after the collapse of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
the fund moved into "safe portfolio" mode which included nominal and inflation-linked bonds and gold instead of equities, emerging market debt spreads, commodities and corporate spreads. The fund is reported to contain 40% inflation-linked bonds, 30% Treasury bills, 20% Treasury bonds and 10% gold.
Pure Alpha Major Markets
Under the guidance of co-CEO, Jensen, the firm rolled out its Pure Alpha Major Markets in 2011 with fund with $2.4 billion from existing clients. In the summer of 2011 the fund was opened to a group of outside investors who had made a total advance commitment of $7.5 billion. At that time, it was reported to be the biggest hedge fund launch ever. The fund was established to provide its existing clients with an investment vehicle similar to the company's Pure Alpha fund but with enhanced liquidity by focusing on the major markets such as European bonds. The launch of this fund in 2011 brought the company’s total assets under management to more than $100 billion.Daily Observations
The company’s “Daily Observations” is a research white paperWhite paper
A white paper is an authoritative report or guide that helps solve a problem. White papers are used to educate readers and help people make decisions, and are often requested and used in politics, policy, business, and technical fields. In commercial use, the term has also come to refer to...
that has been described as “packed with charts and data” and is the flagship product and service offered by the company. It is reportedly read, on a subscription basis, by clients, leaders of central banks and managers of pension funds around the world. It is the centerpiece of the company’s outreach program and reported to be “one of the most widely forwarded pieces of market analysis” in the industry. It has been characterized as comprehensive with some editions being up to 43 pages in length. According to the company these daily reports are read by “members of the U.S. Treasury, [and] the Executive Office of the President of the United States”.
Headquarters
In 1981, the company moved its headquarters 50 miles north of New York CityNew York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, to Wilton, CT and in the late 1990s moved to a larger office space, on a corporate campus, in Westport, CT. As the company continued to expand, it became the sole tenant at the 22 acre Westport campus. The firm’s headquarters is described as retreat-like and is surrounded by the trees of a former nature reserve
Nature reserve
A nature reserve is a protected area of importance for wildlife, flora, fauna or features of geological or other special interest, which is reserved and managed for conservation and to provide special opportunities for study or research...
. The campus contains three buildings, designed by the architect Bruce Campbell Graham, which are made of glass and mid-century fieldstone. Since 2000 its staff has grown from 100 to 1200 employees and the firm has taken office space in three additional buildings in the area. The company’s headquarters have been compared to Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
’s in the sense that both are located away from their respective industry centers.
Employees
Bridgewater Associates has grown from 100 employees in 2003 to 1200 employees in 2011. The company is reported to be one of the few hedge fund managers that hires its analysts and employees right out of college and from the annual pool of graduates from Ivy LeagueIvy League
The Ivy League is an athletic conference comprising eight private institutions of higher education in the Northeastern United States. The conference name is also commonly used to refer to those eight schools as a group...
schools such as Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
, Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....
and Dartmouth College
Dartmouth College
Dartmouth College is a private, Ivy League university in Hanover, New Hampshire, United States. The institution comprises a liberal arts college, Dartmouth Medical School, Thayer School of Engineering, and the Tuck School of Business, as well as 19 graduate programs in the arts and sciences...
. Employees are transported daily in a "fancy" bus that ferries them from Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
to the company's Westport offices. According to the company, many new employees "self-select out" and "about a quarter of all new hires" either quit or are let go within the first two years. Those that remain are reported to receive "generous" compensation and form bonds with fellow employees that are "like family" and company's founder helps to pay for any employees that wish to learn the Transcendental Meditation technique
Transcendental Meditation technique
The Transcendental Meditation technique is a specific form of mantra meditation often referred to as Transcendental Meditation. It was introduced in India in 1955 by Maharishi Mahesh Yogi...
.
Dalio, the company founder, relinquished his chief executive officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
(CEO) title in July 2011 to take on the role of "mentor". The company now has three co-CEO's; Greg Jensen, Eileen Murray
Eileen Murray
Eileen Murray is an American financial services executive and a Chief Executive Officer at Bridgewater Associates. Murray has held executive positions at Morgan Stanley, Credit Suisse First Boston, Duff Capital Advisors and Investment Risk Management. She was named one of the 25 Most Powerful...
and David McCormick; the former undersecretary of the Treasury Department. The company has three co-CIO's (chief investment officers); Dalio, Bob Prince and Jensen (who is also co-CEO). Jensen, the 37 year old, co-CEO, oversees the research programs at the firm and came to the company as a Dartmouth College intern about 15 years ago.
Britt Harris
Thomas Britton Harris IV
Thomas Britton "Britt" Harris IV is the current chief investment officer of the Teacher Retirement System of Texas , the public pension for the state of Texas...
, formerly of Verizon Investment Management, joined Bridgewater Associates as co-chief executive in November 2004 but left six months later. According to Dalio, the cultural fit was a problem, but stated that Harris "is a superstar, with an absolutely fabulous character".
Corporate culture
In 2005 the company’s founder saw the firm taking on hundreds of new employees and decided to create a handbook called Principles, which was distributed to all employees. The publication is said to be part self-help book, part management manual, and part treatise on the mechanics of natural selection as they function in a business setting. According to one trade journal, six years after the publication of Principles, the firm's rapid expansion led to the institution of a “bizarre culture of criticism”. The company acknowledges that employees “often encounter culture shock” when they begin working there and the company’s founder admits: “it’s not for everyone”. According to the company’s web site employees are encouraged to be assertive and discussions about disagreements and mistakes are considered an intentional part of the company’s culture because they are felt to stimulate both learning and progress.A 2011 article in New York Magazine described the company as the "largest and weirdest hedge fund" because of its unique corporate culture. The company encourages employees to do "whatever it takes to make the company great" and emphasizes transparency and openness in its decision making processes.
Transparency, meritocracy, community
The corporate culture features "radical transparency," a theory of management that requires complete honesty and accountability. For this purpose, all meetings are recorded and can be viewed by any employee, as long as the meeting topic is not proprietary. The company fosters "an extreme meritocracy of ideas," and says there is "no hierarchy in the investment decision-making process". Any employee can respectfully say anything to anyone in the firm but they must be prepared to be challenged in return. The company’s flat corporate structure aims to remove the barriers associated with traditional asset management firms and qualities like stodginess and risk-aversion are discouraged.In spite of its critics, the company insists that the firm is a dedicated “community” and not a cult. An article in the New Yorker points out that "the word cult clearly has connotations that don’t apply to an enterprise staffed by highly paid employees who can quit at any moment.” However, critics point out that the headquarters is located away from other financial institutions and "headed by a strong-willed leader with a unique vocabulary." One client of the firm, Bob Jacksha, chief executive officer of the New Mexico Educational Retirement Board, said: "Every investment manager has its own culture and some are more unique than others"