When Ray Dalio, the multibillionaire founder of the world’s biggest hedge fund, Bridgewater Associates, announced his retirement in October, both he and the firm he founded more than four decades ago treated the moment as celebratory.
Mr. Dalio, 73, told his millions of followers on LinkedIn that he felt “great about the people” to whom he had handed the reins. And one of Bridgewater’s two new chief executives, Nir Bar Dea, sent an enthusiastic note to clients: “The transition from Ray is done!”
But neither Mr. Dalio, known for his creed of “radical transparency,” nor Bridgewater said at the time, or since, that he had hardly gone without a fight. His exit — partly spurred by controversial remarks he had made on television about China’s human rights record — followed more than six months of frantic behind-the-scenes wrangling over how much money his successors at the firm were willing to pay the billionaire to go away.
In the end, Mr. Dalio, with an estimated net worth of $19 billion, agreed to surrender his control over all key decisions at Bridgewater only if the firm agreed to give him what could amount to billions of dollars in regular payouts over the coming years through a special class of stock.
These secret arrangements were described by a half dozen current and former Bridgewater employees who said they risked angering Mr. Dalio and could be sued by the firm if they spoke publicly. At an internal meeting last year during the heat of the exit negotiations, Mr. Dalio described the hedge fund as his “property rights,” according to one employee, and indicated that he expected to be compensated accordingly.
Mr. Dalio did not respond to requests for comment.
Bridgewater, which manages roughly $125 billion on behalf of public pensions and sovereign wealth funds, is dealing with a situation that’s becoming increasingly common across corporate America. Builders of companies big and small appear unwilling to let go, or are asked to step back in when there is turbulence.
Recently, Marc Benioff, of the technology giant Salesforce, returned to solo leadership of the company he co-founded in 1999 and cut around 8,000 jobs. Howard Schultz, now on his third go-round in the chief executive of Starbucks, has appeared intent on crushing efforts across the company to unionize store workers.
Google’s founders, Larry Page and Sergey Brin, have stepped in and out of their company several times. And over the summer, Bill Conway, one of the founders of the investing behemoth Carlyle, took the reins after the chief executive left abruptly, and helped choose a new one this month.
While battles in the executive suite may seem far removed from the concerns of everyday American workers, strife in upper management often creates havoc lower in the ranks. In the investing world, upheaval can be such a distraction that fund performance suffers, squeezing retirees and others who count on steady returns from their investment managers.
Many founders, even after selling off a majority of their company, retain power because they hold a special class of shares that give them more voting rights than regular shares and allow them to maintain control over company decisions.
Mr. Dalio’s relationship with Bridgewater goes well beyond that. He has been the firm’s chief executive, chief investment officer and chairman — sometimes solo, sometimes with partners and sometimes all at once.
At the same time, Mr. Dalio has portrayed himself publicly as a management guru of sorts, promoting an unusual workplace philosophy that he calls “radical transparency.” The gist of it is that Bridgewater tapes most of its employee meetings and broadcasts them firm wide, as evidence that it is a place where hard truths can be spoken about openly.
He has discussed how he ranks employees in categories such as “willingness to touch the nerve” and “quick to learn from mistakes.” Under his direction, Bridgewater spent millions of dollars on custom iPad software for employees to rank each other in real time on a 1-to-10 scale in dozens of personality categories.
In 2017, Mr. Dalio published “Principles,” a best-selling book that laid out his leadership rules. (“Be willing 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 rolled out his retirement plans more than a decade ago, in 2009, when he told the firm and its clients that he would begin to turn over his responsibilities. That proved easier said than done. Bridgewater cycled through a seemingly endless group of would-be chief executives as Mr. Dalio found reasons to reject nearly all of them, and vice versa.
One former co-chief executive, Eileen Murray, sued the firm for discrimination after she left in 2020, a matter later settled out of court. She had shared the role with David McCormick, who resigned a little over a year ago to run the Republican primary in Pennsylvania for the Senate, which he lost.
All the while, Mr. Dalio sent mixed signals on whether he would stay or go, telling staff and investors that he would leave only when he was certain that the right leadership was in place.
In mid-2018, Bridgewater said it would become a partnership as part of a long-term plan to move away from founder control. In theory, that should have transformed the firm into an entity controlled by its top employees rather than one man.
But Mr. Dalio wasted little time in telling colleagues that he was not interested in a simple passing of the baton, according to current and former employees. He approached dozens of top employees — at the time, Bridgewater had roughly 1,500 full-time staff members — and told them they would have to buy his shares with their own money, some of those employees said.
Mr. Dalio offered to arrange 10-year loans to those who lacked the funds to buy him out, according to two former employees. If they declined, he intimated that they should consider leaving the firm, they said. Still, even as he sold shares to his colleagues, decreasing his ownership, his founder shares kept him in control.
Mr. Dalio didn’t recede from public view either, often attracting criticism.
In a CNBC interview in the fall of 2021, Mr. Dalio dismissed concerns about China’s human rights track record, likening the country’s government to a “strict parent.” (Bridgewater manages billions of dollars for companies partly owned by the Chinese government.)
“Should I not invest in the United States because of our own human rights leadership?” he asked.
The comments attracted reproach from Washington, where Senator Mitt Romney labeled them a “sad moral lapse.” Clients called Bridgewater, asking whether Mr. Dalio’s views represented those of the firm, two people with knowledge of the matter said. The firm never addressed the matter publicly, though Mr. Dalio later said he had spoken sloppily.
The brouhaha did not appear to soften his views. Inside Bridgewater, Mr. Dalio reasserted a rule dictating that he personally must review and edit the firm’s widely read economic newsletter, called the Daily Observations, for any mentions of China, lest others tone down his praise, one of the people said.
By then, although some at Bridgewater retained a fondness for Mr. Dalio and his history at the firm, others were apoplectic. That left Mr. Bar Dea, one of the co-chief executives, with the task of speeding up negotiations to get his boss out for good, two people with knowledge of the matter said. A former major in the Israeli Defense Forces and relative newcomer to the investing world, Mr. Bar Dea, now 41, joined Bridgewater in 2015 to perform economic research, and rose swiftly through the ranks.
In January 2022, he was elevated to the top role alongside Mark Bertolini, former chief executive of Aetna, though current and former employees say it is Mr. Bar Dea who mainly deals with Mr. Dalio.
The back-and-forth between Mr. Dalio and Bridgewater’s senior leaders stretched on for much of 2022, with Mr. Dalio insisting that he would not simply hand over his life’s work.
Finally, the two sides agreed on a steep price. Mr. Dalio would surrender his titles, take on a new role as “mentor to the C.I.O.s and investment committee,” and remain a member of the hedge fund’s board, according to an announcement by Bridgewater. (Last month, Bridgewater told clients that Mr. Bertolini would give up his co-chief executive role to become a “C.E.O. mentor.”)
Mr. Dalio also received a new, special class of personal stock that the firm informally calls “Ray’s shares,” which pay him the equivalent of a hefty dividend before anyone else at the firm is paid, two people with knowledge of the matter said.
Based on those arrangements — as well as how long Mr. Dalio lives, and how long Bridgewater survives — the payouts could reach billions of dollars.
Although Bridgewater delivered handsome returns for investors for the first three quarters of 2022, the firm’s flagship fund slumped in the fourth quarter, just months after Mr. Dalio’s departure in October. It fell an additional 7 percent in January, while stocks rose sharply.
That puts sharp pressure on the firm to turn things around. Bridgewater no longer posts its assets under management on its website. From its peak of around $160 billion, the amount was down to around $125 billion late last year, according to people familiar with the firm.
In the meantime, Mr. Bar Dea has begun dismantling some parts of Mr. Dalio’s legacy. Bridgewater dropped many of his “Principles,” and their associated ratings tools. Giving unvarnished feedback to one another — a stalwart of Mr. Dalio’s “radical transparency”— is now optional, current employees said.
Still, some of Mr. Bar Dea’s changes have a hint of the hedge fund’s old ways. He has recently taken to telling employees that he is coming up with his own list of “Principles.”
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