Bridgewater Associates is an American investment management firm
Ray Dalio in 1975. The firm serves institutional clients
including pension funds, endowments, foundations, foreign governments,
and central banks.
It utilizes a global macro investing style based on economic trends
such as inflation, currency exchange rates, and U.S. gross domestic
Bridgewater Associates began as an institutional investment
advisory service, graduated to institutional investing, and pioneered
the risk parity investment approach in 1996.
In 1981, the company moved its headquarters from
New York City
New York City to
Westport, Connecticut and currently engages 1,700 employees. As of
2017, it had US$160 billion in assets under management.
1.1 1975-1990: Consulting, research, money management
1.2 1991-present: Pure Alpha, All Weather, Pure Alpha Major Markets
2 Investment philosophy
2.1 Separation of alpha and beta
2.2 Systematic diversification
3 Corporate affairs
3.3 Corporate culture
5 External links
The firm's history includes the pioneering of industry strategies such
as: currency overlay, the separation of alpha and beta strategies,
the creation of absolute return products, and risk parity.
According to Financial News, the company was the fastest growing asset
manager from 2000 until 2005 when it stopped accepting new
accounts. Its assets under management have increased by 25% each
year during the 2001-2010 decade with employees at eleven times their
year 2000 levels. The company’s Daily Observations research is
reportedly read by leaders of central banks and managers of pension
funds around the world.
1975-1990: Consulting, research, money management
Bridgewater Associates was founded by
Ray Dalio in 1975 from an office
Manhattan apartment. At that time, the business consisted
exclusively of advising corporate clients and 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
Nabisco and McDonald's.
The company began publishing a paid subscription research report
called the Daily Observations which inspired McDonald’s Corp. and
its main supplier to become clients in the early 1980s. Another
client was Banks of Mid-America and its treasury department director,
Bob Prince, later joined
Bridgewater Associates as co-CIO. In 1981,
the company moved its offices from
New York City
New York City to Connecticut.
View of lake and trees surrounding the corporate headquarters in
The company's first account was funded by a US$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 investors. As a fixed income and
currency adviser to institutional clients, the company gained a
reputation as a currency trader and a developer of techniques for
overlaying 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.
1991-present: Pure Alpha, All Weather, Pure Alpha Major Markets
Bridgewater Associates developed several "innovative investment
strategies" during the 1990s such as inflation-indexed bonds, currency
overlay, emerging market debt, global bonds and "super-long duration
bonds". The firm also "pioneered the separation of alpha and beta"
investments and developed a strategy called "alpha overlay" which
involved a portfolio of "20 uncorrelated" investments, leveraged for
risk or return and combined with cash or an investment market
The firm launched its Pure Alpha fund and began to market portable
alpha investment strategies in 1991. The Pure Alpha fund did well
during the market's downturn of 2000 to 2003 and, as hedge funds
became more popular, the company expanded its assets through its
connections with various underfunded pension funds, some of which were
already clients. In 1992 the firm introduced its global bond
overlay program. In 1995, company executives participated in the
discussions at the U.S. Treasury and advised federal government on
the development of inflation-indexed bonds.
Bridgewater launched its All Weather hedge fund and pioneered the risk
parity approach to portfolio management in 1996. The firm's
assets under management grew from US$5 billion in the mid-1990s
to US$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 the World's Best
Money Manager in recognition of the 16.3% return on its International
Fixed Income program. The firm received the Global Investor Awards
for Excellence-Global Bonds award in 2003. The following year the
company received the
Global Pensions (magazine)
Manager of the Year award, and 2 "best in class" awards from the
PlanSponsor Operations Survey.
In 2006, the company's flagship Pure Alpha fund began "returning
money" to its clients in order to maintain its investment strategy and
enforce its "capacity limit." The firm began moving all of its clients
into alternative strategies (such as its Pure Alpha and All Weather
funds), thereby eliminating the traditional investment approach from
its portfolios. That year it was honored by PlanSponsor Magazine
with the Lifetime Achievement Award and the Global Pensions
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.
By 2007, the firm's total assets under management grew to
US$50 billion (from US$33 billion in the year 2000).
According to a 2007 article in Barron's magazine, "nobody was better
prepared for the global market crash" than its clients and subscribers
to its Daily Observations. The company "began sounding alarms..in the
spring of 2007 about the dangers of excessive financial leverage."
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 US$839 billion. In
December, these conclusions were reported to the U.S. Treasury
Department when company founder
Ray 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 Jones Industrial Average
Dow Jones Industrial Average increased by 19%
while the company’s Pure Alpha fund reportedly gained a mere 2% to
4%. Bridgewater’s Pure Alpha II has posted a historic average
return of 12 percent with only 3 losing years. Senator John McCain
visited the firm and addressed company employees during his 2008
presidential campaign. The Teacher Retirement System of Texas
(TRS) invested in $250 million in a stake in Bridgewater Associates
Intermediate Holdings, LP.
Ray Dalio, the company's founder, began using the term "d-process" in
February 2009 to describe the deleveraging and deflationary process of
the subprime mortgage industry as distinct from a recession. 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. When the U.S. gross domestic
product faltered in 2010, the firm had significant gains on their
Treasury bonds and other securities, and in November
founded the US$10 billion, Pure Alpha Major Markets fund which
brought the company's total assets under management to more than
US$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
Absolute Return + Alpha (AR) ranked the company number one
Hedge Fund Report Card and Billion Dollar Club
At the end of May 2016, Connecticut is expected to approve a plan
which will give
Bridgewater Associates $22 million in grants and loans
in exchange for job training, job creation, and building renovations.
The company also must agree to retain 1,402 jobs they already support
in Connecticut. The company could also become eligible for as much as
$30 million in urban tax credits.
According to Ray Dalio,
Bridgewater Associates is a "global macro
firm". It uses "quantitative" investment methods to identify new
investments while avoiding unrealistic historical models. Its goal
is to structure portfolios with uncorrelated investment returns based
on risk allocations rather than asset allocations. Additionally, the
company is reported to accept funds only 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 investments, whose returns are generated through passive
management and standard market risk, and (2) Alpha investments, whose
goal is to generate higher returns that are uncorrelated to the
general market and are actively managed. The principle of separating
alpha and beta investments was introduced by Dalio 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.
According to Bloomberg, Bridgewater uses an investing system that
combines traditional diversification with "wager[s] on or against
markets around the world" and attempts to invest in instruments and
markets that do not "move in lock step" with each other. 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 computer's analysis.
Aerial view of the
Bridgewater Associates corporate campus in
In 1981, the company moved its headquarters 50 miles north of New York
City to Wilton, Connecticut, and in the late 1990s it moved to a
larger office space on a corporate campus in Westport,
Connecticut. As the company continued to expand, it became the
sole tenant at the 22-acre 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 made of
"midcentury modern fieldstone and glass". 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. In an effort to
consolidate its offices, the company made plans to build a 750,000
square foot headquarters in Stamford, CT about 15 miles from its
present location in Westport, but cancelled the project in 2014.
Bridgewater Associates grew from 100 employees in 2003 to 1,200
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 League
schools. Employees are transported daily in a "fancy" bus that
ferries them from
Manhattan to the company's Westport offices.
According to an article in Bloomberg, "about a quarter of all new
hires" leave 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 the company's founder helps to
pay for any employees that wish to learn the Transcendental Meditation
Dalio, the founder, relinquished his chief executive officer (CEO)
title in July 2011 to take on the role of "mentor." The company's
administration consists of three co-CEO's; Greg Jensen, Eileen Murray
and David McCormick; the former undersecretary of the Treasury
Department. The company also 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 earlier. Britt Harris, formerly of Verizon Investment
Management, joined Bridgewater as co-CEO in November 2004 but left six
months later. According to Dalio, the cultural fit was a problem, but
Harris "is a superstar, with an absolutely fabulous character".
From 2010 until early 2013, Bridgewater's general counsel was James
United States Deputy Attorney General
United States Deputy Attorney General and former
Director of the Federal Bureau of Investigation.
In 2005, Dalio 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 Dalio
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
A 2011 article in
New York Magazine
New York Magazine described the company as the
"largest and indisputably weirdest hedge fund" because of its
unwavering commitment to "total honesty and accountability" and minute
detail in its corporate culture. For example, Dalio encourages
employees to do "whatever it takes to make the company great" and
emphasizes transparency and openness in its decision making
processes. All meetings are recorded and can be viewed by any
employee as long as the meeting topic is not proprietary. In
addition, Dalio says that he fosters "an extreme meritocracy of ideas"
and asserts that decisions are made about investments without
considerations of hierarchy. He says that 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.
The company has been likened to a cult, but Dalio denies that and
insists that the firm is a dedicated "community". An article in the
New Yorker by John Cassidy says 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." Cassidy says the company is
located away from other financial institutions and headed by a
"strong-willed leader" and that employees use a "unique
vocabulary". One client, Bob Jacksha, chief executive officer of
the New Mexico Educational Retirement Board, said of the firm: "Every
investment manager has its own culture [and] some are more unique than
Coordinates: 41°10′20″N 73°21′46″W / 41.17222°N
73.36278°W / 41.17222; -73.36278
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Capital structure arbitrage
Equity market neutral
Fixed income arbitrage /
Fixed-income relative-value investing
Commodity trading advisors / Managed futures account
Fund of hedge funds / Multi-manager
Arbitrage pricing theory
Assets under management
Black–Scholes model (Greeks (finance): Delta neutral)
Capital asset pricing model
Capital asset pricing model (Alpha / Beta / Security characteristic
Taxation of private equity and hedge funds
Fund of hedge funds
Sovereign wealth funds
Hedge Fund Standards Board
Alternative investment management companies
Hedge fund managers