Warrior Trading Blog

Ray Dalio: How He Came to Run the Largest Hedge Fund in the World

To be a giant among giants is a rare achievement that few people can boast of. Ray Dalio, founder of Bridgewater Associates, runs the largest Hedge Fund in the world.

Bridgewater Associates is a titan of the hedge fund industry, an industry already known for the jaw-dropping capitalizations of some of its biggest firms.

With more than $160 billion under management and over 1,700 employees Bridgewater should be more like an investment firm than a hedge fund, but Dalio’s leadership and influence have led to consistent over-performance, even during some of the worst downturns in financial history.

Dalio and Bridgewater are known in particular for making consistent outsized returns while the recent financial crisis was laying other hedge funds and investment firms low.

Dalio’s commitment to constant innovation and evolution has ensured that Bridgewater has consistently adapted to changing circumstances, instead of fading into irrelevance like so many of its competitors over the decades.

This impressive legacy leaves us wondering exactly who ray Ray Dalio is and where he comes from.

Let’s take a look at the origins of one of the titans of the investing world. It is fair to say that what you read may surprise you.

Early Life

Dalio was born the son of a jazz musician and home maker in New York City. Growing up he had little interest in the rote memorization of school, but held down a number of jobs, including one as a caddy on a prestigious golf course.

It was on this golf course that he got his first taste of the investing world, while listening to the talk of investment professionals whom he caddied for. With $300 saved up from his caddy work he invested in a major airline that soon underwent a merger, and Dalio earned a stunning 200% return on his first ever investment.

Growing as an Investor

From that moment on he was hooked on the markets and began reading everything he could to learn more about the business and financial worlds. From these humble beginnings he gradually developed his life philosophy on investing, and realized that the only way to make money in the markets was to be right when other people were wrong.

By developing his own investment ideas and having them critiqued by financial professionals that he had come to know, he was able to refine his ideas and build an impressive portfolio of shares at a very young age.

His less than stellar academic achievements meant that he struggled to find a good college to attend, but he continued to focus on his growth as an investor. He began to research the growing area of commodity futures, whose low margin requirements appealed to the aggressive young investor with only a small amount of starting capital.

Finding His Place

Once he was able to combine his passion for investing with his college education, Dalio began to excel in his studies, helped along by an interest in meditation inspired by the Beatles’ India tour. With his excellent academic record he was able to gain admission to the prestigious Harvard Business School and land a job as a clerk on the floor of the New York Stock Exchange.

It was during this period that the American financial world underwent a major shift as they came off the gold standard and rapid inflation led to a booming stock market. Then, to rein in this inflation, the Federal Reserve began raising interest rates, which sent stocks plunging and commodities soaring.

This meant that Dalio came into the professional investing world with rare first hand experience of the largest growth area in finance.

Founding His Firm

Dalio applied these lessons from his early life and university years to create an investment philosophy that allowed him to grow the firm he founded in his own 2-bedroom apartment into a global behemoth.

By consistently predicting the major trends across the full range of assets, a term that Dalio coined as ‘global macro’, Bridgewater has been able to stay ahead of the curve and predict the major shifts that lead to the rise and fall of security prices.

This global outlook combined with a unique corporate culture and a commitment to developing the latest systems-based investing strategies has allowed Bridgewater to consistently outperform its rivals year after year, and gather an impressive list of the world’s most wealthy and prestigious clients.

 

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