Raymond Thomas Dalio, the Co-Chairman and Co-Chief Investment Officer of Bridgewater Associates and the best performing hedge fund manager continued to maintain his position in 2020.
Over the years, Ray Dalio, a renowned hedge fund manager, has come to be referred to as the 'Steve Jobs of investing'.
But, why so?
The investment world will surely be aware of who he is!
In this blog, we are going to navigate through the story of Ray Dalio and this will help us understand why he has been given such a title!
A New Yorker by heart, Ray Dalio’s father was a jazz musician and his mother was a homemaker. But he did not take up the path of music. On the contrary, as a child, he was a curious and independent thinker, and a sports lover.
Young Ray Dalio took up a bunch of odd jobs to make some money. Examples include mowing the lawns of his neighbour and shovelling snow from driveways. At the age of 12, he picked up the work of caddy at a posh golf club. The golf club was sort of a niche place for people working on Wall Street to play and discuss stocks.
Like a moth to a flame, Ray Dalio started drifting towards any investment talk. He picked up a few tips and then invested $300 in North East Airline at an early age. The investment return exceeded all expectations and tripled in value.
A restless soul, Dalio disliked the culture of rote memorization in schools. He kept looking for other things to interest him. Soon, he started to collect coupons for free annual reports from the Fortune 500 companies to spot good investment options. He continued to invest in this manner throughout his high school.
During his early years, one of the things that interested him, in particular, was commodity futures.
I learned a lot about commodity futures from a very interesting classmate, a Vietnam veteran quite a bit older than me. Commodities were attractive because they could be traded with very low margin requirements, meaning I could leverage the limited amount of money I had to invest.
-Ray Dalio, Principles: Life and Work
After graduating with an MBA from the Harvard School of Business, Ray Dalio started his career as a clerk at the New York Stock Exchange.
It served as an invaluable experience for Ray Dalio. He learned about the currency market, price movements and much more. During this time, he realised that most of the occurrences in the capital markets could be attributed to cause-and-effect relationships. Most of the inexplicable phenomena could be unravelled using a bit of logical thinking.
Whenever I took a position in the markets, I wrote down the criteria I used to make my decision. Then, when I closed out a trade, I could reflect on how well these criteria had worked.
-Ray Dalio, Principles: Life and Work
It is this epiphany that laid the building blocks of Ray Dalio’s investment principles.
Over the course of his career, Ray Dalio worked at a number of popular firms like Dominick and Dominick, and Shearson. He would help his clients manage the risks associated with price movements in the stock market.
It was only in 1975 that Ray Dalio decided to open his own fund – Bridgewater Associates.
The foundation of the world’s biggest hedge fund, Bridgewater Associates was laid at Ray Dalio’s 2-bedroom apartment in New York.
The story of how the name ‘Bridgewater’ was chosen for the firm is worth a read.
When Ray Dalio decided to start his own firm, he wanted to sell commodities from the United States to other countries. It would have been an attempt to ‘bridge the waters’ between various nations. Hence, the term ‘Bridgewater’ came into being.
When Ray Dalio started his firm, he would always put himself into the client’s shoes. He would think of appropriate positions from their point of view. He helped them with their accounts, enabled them to understand the company financials and strategized on how to reduce risk exposure.
As he worked with clients, he would note down the principles that helped make investment decisions. These can be termed as the macro-observations of Ray Dalio. These points helped him to analyze the price movements in the market. Ultimately, it helped him to make wiser investment decisions.
Bridgewater Associates is the world’s biggest hedge fund company with an impressive asset under management (AUM) of $160 billion. Over the last 23 years, the company has delivered 11.5% returns per year. This is almost double the returns provided by the S&P 500.
Striking, isn’t it?
You can see the return given by the firm since 1991, through the graph given below.
These statistics are a testimony of how humongous the firm is and has been!
In fact, it was one of the private firms which survived the 2008 financial crisis with an AUM of $50 billion at that time. After the financial crisis, Ray Dalio’s Bridgewater Associated emerged even stronger and by 2011 it reached the mark of $100 billion (AUM).
Apart from being a successful entrepreneur, Ray Dalio is also an ardent philanthropist.
He has pledged to give half of his net worth to various charities by becoming part of The Giving Pledge campaign. Along with this, he has his own organization Dalio Philanthropies, through which he carries out charitable activities.
Since 2003, through Dalio Philanthropies, Bridgewater founder Ray Dalio and his family over $1 billion to a wide range of meaningful causes – including health equity, social entrepreneurship, education, ocean exploration and much more.
If you want to know more about Ray Dalio’s investment philosophies, you can check out some of his work as follows.
I hope by now you would have understood why this American investor is called the Steve Jobs of investing!