Hedge fund billionaire extracts billions more to retire
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.
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 CEOs, Nir Bar Dea, sent an enthusiastic note to clients: “The transition from Ray is done!”
But neither 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-thescenes wrangling over how much money his successors at the firm were willing to pay the billionaire to go away.
In the end, 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 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, Dalio described the hedge fund as his “property rights,” according to one employee, and indicated that he expected to be compensated accordingly.
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.
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.
Dalio’s relationship with Bridgewater goes well beyond that. He has been the firm’s CEO, chief investment officer and chair — sometimes solo, sometimes with partners and sometimes all at once.
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 CEOs as Dalio found reasons to reject nearly all of them, and vice versa.
All the while, 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 a CNBC interview in fall 2021, 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 Sen. Mitt Romney labeled them a “sad moral lapse.” Clients called Bridgewater, asking whether Dalio’s views represented those of the firm, two people with knowledge of the matter said. The firm never addressed the matter publicly, though Dalio later said he had spoken sloppily.
Although some at Bridgewater retained a fondness for Dalio and his history at the firm, others were apoplectic. That left Bar Dea, one of the co-CEOs, with the task of speeding up negotiations to get his boss out for good, two people with knowledge of the matter said.
Finally, the two sides agreed on a steep price. Dalio would surrender his titles, take on a new role as “mentor to the CIOs and investment committee,” and remain a member of the hedge fund’s board, according to an announcement by Bridgewater.
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 Dalio lives, and how long Bridgewater survives — the payouts could reach billions of dollars.