Hedge fund billionaire Ray Dalio is getting billions more from retirees

When Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, announced his retirement in October, he and the company he founded more than four decades ago treated the moment as celebratory.

Mr. Dalio, 73, told his millions of LinkedIn followers that he feels “a great feeling about the people” he’s handed over the reins to. And Nir Bar Dea, one of Bridgewater’s new CEOs, sent an enthusiastic note to clients: “Move on from Ray!”

But neither Mr. Dalio, known for his belief in “radical transparency,” nor Bridgewater said at the time, or since, that he hardly went without a fight. His exit — spurred in part by controversial comments he made on television about China’s human rights record — followed more than six months of frenzied debate behind the scenes over how much money his successors in the company were willing to pay the billionaire to walk away. .

In the end, Mr. Dalio, with Estimated net worth $19 billion, he agreed to surrender control of all major decisions in Bridgewater only if the company agreed to give him what could run into billions of dollars in regular payments over the coming years through a special class of stock.

These secret arrangements were described by six current and former Bridgewater employees who said they risk angering Mr Dalio and could be sued by the company if they speak out. In an internal meeting last year during the height of exit negotiations, Mr. Dalio described the hedge fund as “equity,” according to one employee, and indicated he expected to be compensated accordingly.

Mr. Dalio did not respond to requests for comment.

Bridgewater, which manages nearly $125 billion on behalf of public pension and sovereign wealth funds, is dealing with a situation that is becoming increasingly common across corporate America. Business builders large and small seem unwilling to let go, or told to back off when there is disruption.

Recently, Marc Benioff of tech giant Salesforce returned to solo leadership of the company he co-founded in 1999 and cut about 8,000 jobs. Howard Schultz, now in his third round as CEO of Starbucks, seems intent on crushing efforts across the company to unite store workers.

Google’s founders, Larry Page and Sergey Brin, have been in and out of their company many times. And over the summer, Bill Conway, a co-founder of investment giant Carlyle, took over after CEO abruptly left, and helped pick a new chairman this month.

While battles in the executive wing may seem far removed from the concerns of ordinary American workers, conflict in upper management often wreaks havoc on the lower ranks. In the investment world, turmoil can be such a distraction that fund performance suffers, stressing retirees and others who depend on steady returns from investment managers.

Many founders, even after selling the majority of their companies, retain power because they own a special class of shares that gives them more voting rights than common shares and allows them to control company decisions.

Mr. Dalio’s relationship with Bridgewater goes far beyond that. He’s been the company’s CEO, chief investment officer and chairman of the board — sometimes alone, sometimes with partners and sometimes with everyone at once.

At the same time, Mr. Dalio has publicly portrayed himself as a management guru of sorts, promoting an unusual workplace philosophy he calls “extreme transparency.” The gist of it is that Bridgewater records most of its staff meetings and broadcasts it widely, as evidence that it is a place where hard truths can be spoken openly.

He has Discuss how to classify employees In categories such as “Willingness to touch a nerve” and “Quick to learn from mistakes.” At his direction, Bridgewater has spent millions of dollars on iPad software for employees to rate each other in real time on a scale of 1 to 10 in dozens of personality categories.

In 2017, Mr. Dalio published Principles, a best-selling book that laid out his leadership rules. (“Be prepared to ‘shoot the people you love’,” read one.) He has since become a regular speaker at TED conferences and is prolific on Twitter.

Mr. Dalio and Bridgewater floated his retirement plans more than a decade ago, in 2009, when he told the company and its clients that he would start handing over his responsibilities. That proved easier said than done. Bridgewater was scrolling through a seemingly endless pool of potential CEOs as Mr. Dalio found reasons to turn down nearly all of them, and vice versa.

Former co-CEO Eileen Murray sued the company for discrimination after leaving in 2020, a matter that was later settled out of court. She had shared the role with David McCormick, who resigned just over a year ago to run the Pennsylvania Republican Senate primary, which he lost.

All the while, Mr. Dalio has sent mixed signals about whether to stay or go, telling staff and investors he will only leave when he is sure that the right leadership is in place.

In mid-2018, Bridgewater said it would become a partnership as part of a long-term plan to move away from the founder’s control. In theory, that should have turned the company into an entity controlled by its senior employees rather than one man.

But Mr. Dalio didn’t waste much time telling colleagues he wasn’t interested in simply passing the baton, according to current and former employees. Some of those employees said he called dozens of senior employees—at the time, Bridgewater had roughly 1,500 full-time employees—and told them they would have to buy his stock with their own money.

Mr. Dalio has offered a 10-year loan arrangement for those who lack the funds to buy it, according to former employees. If they refused, they said, he had hinted that they should consider leaving the company. Yet even as he sold shares to associates, reducing his ownership, his corporation’s shares kept him in control.

Mr. Dalio hasn’t backed away from public opinion either, often drawing criticism.

In an interview with CNBC in the fall of 2021, Mr. Dalio dismissed concerns about China’s human rights record, likening the country’s government to a “strict parent.” (Bridgewater manages billions of dollars for companies partially owned by the Chinese government.)

“Should I not invest in the United States because of our leadership in human rights?” Asked.

The comments drew censure from Washington, with Senator Mitt Romney calling it a “sad moral lapse”. Clients contacted Bridgewater, asking if Mr. Dalio’s views represented those of the company, two people familiar with the matter said. The company never addressed the matter publicly, though Mr. Dalio later said he had spoken dirty.

The hype didn’t seem to dampen his views. Inside Bridgewater, Mr. Dalio restated a rule that he must personally review and edit the company’s widely read economic newsletter, called the Daily Observations, for any reference to China, lest others One of them said: Reduce his praise.

By then, though some in Bridgewater retained a fondness for Mr. Dalio and his history in the company, others were apoplexy. That left Mr. Bar Dee, one of the co-CEOs, with the task of accelerating negotiations to get his boss out for good, said two people familiar with the matter. Mr. Bar-Dia, a former major in the Israel Defense Forces and a relative newcomer to the investment world, joined Bridgewater in 2015 to do economic research, and has risen rapidly through the ranks.

In January 2022, he was elevated to the top position alongside Mark Bertolini, the former CEO of Aetna, although current and former employees say it is mainly Mr. Bar Dia who does business with Mr. Dalio.

The ambivalence between Mr. Dalio and Bridgewater’s top leaders has spilled over for most of 2022, with Mr. Dalio insisting he won’t simply hand over his life’s work.

Finally, both sides agreed to a heavy price. Mr. Dalio will relinquish his titles, take on a new role as “a mentor to CIOs and the investment committee,” and remain a member of the hedge fund’s board, according to the Bridgewater announcement. (Last month, Bridgewater told clients that Mr. Bertolini would step down from his co-CEO role to become an “adviser to the CEO”).

Mr. Dalio also received a special new class of personal shares that the company informally calls “Ray shares,” which pay him the equivalent of a huge dividend before anyone else in the company is paid, two people familiar with the matter said.

Depending on these arrangements—plus how long Mr. Dalio lives and how long Bridgewater survives—the payments could run into billions of dollars.

Although Bridgewater generated good returns for investors in the first three quarters of 2022, the company’s main fund slumped in the fourth quarter, just months after Mr. Dalio left in October. It fell an additional 7 percent in January, while stocks rose sharply.

This puts severe pressure on the company to turn things around. Bridgewater no longer publishes its assets under management on its website. From its peak of around $160 billion, the amount has fallen to around $125 billion late last year, according to people familiar with the company.

Meanwhile, Mr. Bar Dia has begun dismantling some parts of Mr. Dalio’s legacy. Bridgewater abandoned many of its “principles” and associated classification tools. Giving off-the-cuff feedback to each other — one of the strongest elements of Mr. Dalio’s “radical transparency” — is now optional, current employees said.

However, some of Mr. Bar-Dia’s changes point back to the old ways of the hedge fund. Lately he’s been in the habit of telling employees that he’s coming up with his list of “principles.”