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Wednesday, March 25, 2009

Ray Dalio - Fortune interview

Ray Dalio was recently interviewed for a Fortune magazine profile of Bridgewater Associates, the "world's biggest hedge fund".

You may know Dalio as founder and chief of said hedge fund; his views on the markets and the economy (see our related articles and posts below) are already a popular draw with traders and investors across the globe, as well as Finance Trends readers. So, let's get to the new stuff...

Here's the lead in from Fortune's piece:

"Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That's the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, has been preparing to answer it for eight years.

In 2001 he had his investment team build a "depression gauge" into the firm's computer system, line by line in the code, to adjust the portfolio's strategy and risk profile if the economy ever entered a massive deleveraging period - the kind of multiyear process that ricocheted through the world economy in the 1930s and that has eviscerated markets periodically through the ages.

On Sept. 30 of last year, just a couple of weeks after the failure of Lehman Brothers, Dalio logged into his system and saw that the computer had flipped the switch. Bridgewater's black box is now operating on high alert.

Yet even as he is preparing his clients to hunker down for something different and more challenging than a typical recession, Dalio still expects his fund to thrive. Because his approach doesn't depend on the direction of any particular market, he explains matter-of-factly, there is no reason that he shouldn't continue to find as many good investment opportunities as he always has. Considering what he sees coming, that's a pretty bold statement."

Check out the full article at the link above. With Bridgewater's Ray Dalio as the focus, it should prove enlightening.

Sidenote: Ray Dalio also appears in the latest Alpha magazine list of top hedge fund earners.

As Barry Ritholtz points out, at least these hedge fund chiefs have earned their pay by performing for their investors (unlike some of the "bailout banksters" on the taxpayer dole).

Update: Caveat to that last part about hedge fund chiefs earning their pay; I will be taking back that comment if private equity investors and hedge funds like Bridgewater end up raping the taxpayers via the toxic-assets plan/PPIP. More on that tomorrow.

Related articles and posts:

1. Ray Dalio in Barron's: it's a "D-process" - Finance Trends.

2. Ray Dalio Financial Times profile - Finance Trends.