Bridgewater Associates is set to cap investments in its flagship vehicle and cut about eight per cent of its workforce in the most significant shake-up of the world’s largest hedge fund since founder Ray Dalio ceded control of the firm.
Nir Bar Dea, chief executive, announced the changes in a memo sent to Bridgewater employees and clients on Wednesday, saying the firm had to “cut costs, free up resources and restructure”.
Bridgewater will cut about 100 jobs while its Pure Alpha fund will stop accepting new money once it hits a certain size in an attempt to enable it to react more quickly to shifting markets, one person familiar with the plan said.
The cap on the fund will be set at a threshold that is 20-30 per cent lower than its peak size of $100bn.
“Our reality now is that we are simultaneously in an exciting time given the opportunities ahead, and a painful one as we need to part ways with great teammates who have been on the journey with us,” Bar Dea wrote in the memo, which was first reported by Bloomberg.
The decision comes as Bridgewater attempts to make up ground it has lost to rivals such as Citadel, which reported blockbuster profits last year.
The firm’s Pure Alpha strategy had a strong start to 2022, notching up a 32 per cent gain in the first six months of the year, but faltered in the second half with the fund ending the year up 9.5 per cent, according to performance figures seen by the Financial Times.
Bridgewater has grown into a behemoth in part by not restricting new investments in its fund from endowments, insurers and pension plans. Many of its smaller competitors have long restricted access, hoping their smaller size would give them a nimbleness to move in and out of trades as markets shift.
To boost returns, Bar Dea said Bridgewater would invest heavily in artificial intelligence and machine learning, expand in Asia, and bolster its business in sustainability and long-only equity investing.
The overhaul comes as Bridgewater plots its future without Dalio, who gave up control in October following a prolonged transition process. Bar Dea also told employees and investors that Mark Bertolini, his co-chief executive, would step down and return to the board as an outside director, leaving him to run the firm single-handedly.
Dalio stepped down as chief executive in 2017 and in 2020 Bridgewater established a committee to guide its investment process. Last month it added Karen Karniol-Tambour as a co-chief investment officer, alongside investing heads Greg Jensen and Bob Prince.
Bar Dea’s ascent to the top job capped a tumultuous period at Bridgewater. Jensen, who had previously been a co-chief executive alongside Dalio, stepped down in 2016. The firm then brought in senior Apple executive Jon Rubinstein as co-chief executive, only for him to depart less than a year into the role after he proved not to be a “culture fit”.
David McCormick took up the spot but last year resigned to launch an unsuccessful run for the US Senate, at which point he was replaced by Bar Dea and Bertolini.