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Market Is Tanking but Ray Dalio Is Having a Fantastic Year

September 08, 2011 | About:
Ray Dalio is not a value investor. In fact he considers himself to be a macro investor.

According to a recent article in The New Yorker, “In search of profitable opportunities, (Ray Dalio’s) Bridgewater buys and sells more than a hundred different financial instruments around the world—from Japanese bonds to copper futures traded in London to Brazilian currency a contract—which explains why it keeps a close eye on Greece. In 2007, Dalio predicted that the housing-and-lending boom would end badly. Later that year, he warned the Bush Administration that many of the world’s largest banks were on the verge of insolvency.”

Dalio's returns are either a six sigma event or is doing something right.

For the past 18 years his flagship hedge fund, Pure Alpha, has averaged an annual return of 15% before fees. He now manages close to $122 billion, and is up 25% this year, versus approximately 5% drop for the S&P 500.

Bloomberg had a very interesting article about Ray Dalio. Below is an excerpt followed by the full link:

Bridgewater Associates LP founder Ray Daliocan rattle off the investing fads he’s witnessed since he began trading as a 12-year-old golf caddie: the Nifty-50 stock craze of the 1970s, the 1980 gold bubble and even the 60- 40 stock-to-bond mix.

“Manias occur when there is group thinking,” Dalio says.

Dalio, 62, built Bridgewater into the world’s largest macro hedge-fund firm, with $122 billion in total assets, by tacking against consensus. He’s created a distinct workplace culture and a research-driven investing process that spreads risk across scores of markets, Bloomberg Markets magazine reports in its October special issue on the 50 Most Influential people in global finance.

“Making money is a zero-sum game, so to be successful you have to be willing to stand apart from the crowd,” Dalio says. “And you have to be right.”

The founder was right often enough during and after the worst financial crisis in decades starting in 2008, helping to cement his reputation as a leader in his industry. Three Bridgewater hedge funds placed among the 100 top-performing large funds in Bloomberg Markets’ annual ranking in February, including its flagship, Pure Alpha II. The No. 3 fund posted a 38 percent return for the 10-month period through October 2010.

Dalio’s influence spreads beyond his elite industry. He and his colleagues regularly brief central bankers, as well as pensions and sovereign-wealth funds, on their outlook. The firm’s newsletter -- Bridgewater Daily Observations -- is required reading for macroeconomic thinkers for its prescient analysis.

Economic Power

In August 2007, as credit markets were tightening, the newsletter warned, “Hedge funds in general are unlikely to provide much diversification to help protect against poor performance of traditional markets.”

The next year, funds lost an average of 19 percent.

Below is a link to the full article-http://www.bloomberg.com/news/2011-09-07/dalio-returns-25-on-diversified-bets-as-markets-convulse-influential-50.html

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


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