On Tuesday, Ray Dalio (Trades, Portfolio), the billionaire founder of Bridgewater Associates, stepped down as one of the firm’s three co-chief investment officers and transferred his majority stake to the Operating Board. He remains a meaningful owner of the $150 billion hedge fund and will have a new title: founder and CIO mentor. He will also continue as a member of the Operating Board.
This is the latest step in the 73-year-old investor’s succession plan. He previously stepped down as Bridgewater’s CEO in 2017 and chairman in late 2021, and in recent years, he has focused on mentoring the committee overseeing the hedge fund’s investing strategies.
Dalio’s legacy
Dalio founded Bridgewater in 1975 out of his New York apartment, and over the past 47 years, it has grown to become the world’s largest investment firm and the fifth most important company in the U.S. according to Fortune Magazine.
Bridgewater takes a principled approach to investing, applying standardized methods to deal with recognizable market patterns. Dalio’s investment innovations such as risk parity, alpha overlay and “All Weather” are recognized as having changed the way global institutions approach investing.
As a global macro-investment manager, the firm diversifies itself with investments in 150 different markets. Its management strategy is based on creating an “idea meritocracy” where fund managers employ radical truth and radical transparency, encouraging open and honest dialogue and allowing the best thinking to prevail.
Dalio is also the author of several books on investing, most notably his New York Times number one bestseller "Principles," and he has garnered a wide following for the articles he regularly posts on LinkedIn.
From founder-led to employee-driven
Many investment firms and companies struggle when a power transition comes up, especially when it comes to transitioning away from being founder-led. However, Bridgewater is not one of them. From the beginning, Dalio has built Bridgewater in a way that could easily move on to an employee ownership model.
The firm has transitioned from founder-led to employee-driven in stages over the past few years. Many legal steps were needed to complete the transition, but on Oct. 4, the company announced that all of the necessary steps had been completed as of the preceding Friday.
In an email to Bridgewater’s clients, the firm’s co-CEOs Nir Bar Dea and Mark Bertolini wrote:
“It’s hard to overstate the importance of this moment for Bridgewater and Ray. Ray founded Bridgewater 47 years ago and, over a decade ago, set out on this journey to transition it. This process wasn’t easy and we didn’t always agree, but together, we’ve now finished something that very few firms or founders have accomplished, shifting from being a founder-led boutique to being an enduring institution led successfully by the next generation.”
Will Bridgewater’s strategy change?
Since Bridgewater’s transition has been gradual, it seems unlikely the investment firm’s strategy will change much just because Dalio is stepping down from active management. Dalio and the rest of the team at Bridgewater have built an institution they expect to endure based on time-honored investing principles. Moreover, Dalio will still remain with the firm in a mentor role.
You can read more about Dalio and Bridgewater by checking out Bridgewater’s profile on GuruFocus.
