Raymond served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985. He founded Bridgewater in 1975 in New York. Within ten years, it was infused with a $5 million investment from the World Bank's retirement fund. Dalio is regarded as one of the greatest innovators in the finance world, having popularized many commonly used practices, such as risk parity, currency overlay, portable alpha and global inflation-indexed bond management.
Dalio was born in New York City, and attended C.W. Post College of Long Island University before receiving an MBA from Harvard Business School in 1973. Two years later, in his apartment, Dalio launched Bridgewater. In 2013, it was listed as the largest hedge fund in the world. In 2020 Bloomberg ranked him the world's 79th-wealthiest person. Dalio is the author of the 2017 book Principles: Life & Work, about corporate management and investment philosophy. It was featured on The New York Times best seller list, where it was called a "gospel of radical transparency."
Dalio was born in the Jackson Heights neighborhood of New York City's Queens borough. When he was 8, the family moved from Jackson Heights to Manhasset in Nassau County, New York. He is the son of a jazz musician, Marino Dalio (1911–2002), who "played the clarinet and saxophone at Manhattan jazz clubs such as the Copacabana," and Ann, a homemaker. As a child, Dalio had various odd jobs, including mowing lawns, shoveling snow, and a paper route. He is of Italian descent. At age 12, he started caddying at The Links Golf Club, which was walking distance from his childhood home. He caddied for many Wall Street professionals during his time there, including Wall Street veteran George Leib. Leib and his wife Isabelle invited Dalio to their Park Avenue apartment for family dinners and holiday gatherings. The couple's son, a Wall Street trader, later gave Dalio a summer job at his trading firm. He began investing at age 12, when he bought shares of Northeast Airlines for $300 and tripled his investment after the airline merged with another company. By the time he reached high school, he had built up an investment portfolio of several thousand dollars. He received a bachelor's degree in finance from Long Island University (C.W. Post College) and an M.B.A. from Harvard Business School in 1973.
In his high school years, Dalio was an average student. He found school repetitive and monotonous, and saw no practical applications for the skills he was learning. Because of this, he had trouble finding a college to enroll at. He finally applied and got into C.W. Post College, a campus of Long Island University. He continued to buy and sell stocks in college, but became attracted to something new: commodity futures. Commodity futures had low borrowing requirements at the time, and Dalio knew he could profit more handsomely than with simple stocks. At the same time, he was beginning to enjoy school. With more freedom given to him, he took up transcendental meditation, which he still practices to this day. With this newfound strategy to manage stress and focus, along with his blossoming appetite for learning, Dalio excelled academically. At the end of his time at C.W. Post College, he was admitted to Harvard Business School.
After graduating from C.W. Post College, Dalio had a free summer. He took a job as a clerk on the New York Stock Exchange. While there, he witnessed Nixon's decision to take the United States off of the gold standard. Due to the inflation this caused, stock prices on the exchange rose, on average, 33% the following day. These events set in motion the Great Inflation of the 1970s. The combination of easy money policy and abandonment of fiscal discipline set prices soaring. The next summer, after his first year at Harvard, Dalio and his friends created the company that later became Bridgewater Associates. It started off as a small entity, and its goal was to trade commodities. But they lacked experience and the venture yielded little fruit. Although the original Bridgewater failed, Dalio retained the name and used it to create the largest hedge fund ever. This experience trading commodities later became much more valuable, as the high interest rates used to break the back of inflation caused the stock market to fall. This caused investors on Wall Street to turn to commodities, which are typically more resilient and thrive during times of inflation.
After graduating from Harvard, Dalio married and started a family. He moved to Wilton, Connecticut, where he lived and traded out of a converted barn. Dalio then worked on the floor of the New York Stock Exchange and traded commodity futures. He later worked as the Director of Commodities at Dominick & Dominick LLC. In 1974 he became a futures trader and broker at Shearson Hayden Stone, a securities firm run by Sandy Weil, who later became famous for building up Citigroup. At the firm, Dalio's job was to advise cattle ranchers, grain producers, and other farmers on how to hedge risks, primarily with futures. But he was largely dissatisfied with Shearson Hayden Stone's hierarchical structure, which reminded him of primary education. He longed for the more freedom-based lifestyle of college. At one point, he paid a stripper to drop her clothes in front of a crowd at the annual convention of the California Food and Grain Growers' Association. His creative ways of blowing off steam continued, and exploded on New Year's Eve in 1974 after he went out drinking with some colleagues, including his boss. After a disagreement with his superior, a drunk Dalio punched him in the face. Soon afterward, he was let go from his job at Shearson Hayden Stone.
Despite his aggressive behavior, numerous clients at Shearson Hayden Stone retained their trust in Dalio, and continued to allow him to manage their money. With this capital, he was able to scrape together the beginnings of his asset management fund. In 1975, he founded Bridgewater Associates out of his two-bedroom New York City apartment. Bridgewater started out as a wealth advisory firm, and did so for numerous corporate clients, mostly from Dalio's job at Shearson Hayden Stone. The main areas in which Dalio advised were currencies and interest rates. The company began publishing a paid subscription research report, Daily Observations, in which it analyzed global market trends. Dalio's big break came when McDonald's signed on as a client of his firm. Bridgewater then began to grow rapidly. The firm signed on larger clients, including the pension funds for the World Bank and Eastman Kodak. In 1981 the firm opened an office in Westport, Connecticut, which was where Ray and his wife wanted to start a family. Dalio started to become well-known outside of Wall Street after turning a profit from the 1987 stock market crash. The next year, he appeared on an Oprah Winfrey Show episode titled "Do Foreigners Own America?" In 1991, he launched Bridgewater's flagship strategy, "Pure Alpha", a reference to the Greek letter that, in Wall Street terminology, represents the surcharge a money manager can earn above a particular market benchmark, such as the NASDAQ. In 1996, Dalio launched All Weather, a fund that pioneered a steady, low-risk strategy that later became known as risk parity.
Dalio deploys multiple strategies within Bridgewater Associates. Dalio deploys capital to each of these strategies in proportions that he sees fit. According to Dalio, Bridgewater Associates is a "global macro firm", investing around economic trends, such as changes in exchange rates, inflation, and G.D.P. growth. The New Yorker called Dalio “a big-picture thinker connected to a street-smart trader". Dalio divides his holdings into two different areas: beta investments and alpha investments. Beta investments produce returns through passive management and normal market risk. Alpha investments are actively managed and aim to generate better returns than beta investments. Alpha investments are not related to the general market. Dalio uses "quantitative" investment methods to identify new investments while avoiding unrealistic historical models. Dalio's goal is to structure portfolios with uncorrelated investment returns based on risk allocations rather than asset allocations. Dalio's hedge fund mostly accepts money from institutional clients such as pension funds, foundations, endowments, and central banks. Private investors can rarely invest in Dalio's holdings.
When it comes to application, Dalio translates his market insights into algorithms, much like fellow quantitative hedge fund managers David Elliot Shaw and Jim Simons. His strategy mainly focuses on currency and fixed income markets. This is in contrast to buying individual shares in companies, like investors such as Warren Buffett and Peter Lynch. Dalio also popularized the risk parity approach, which he uses for risk management and diversification within Bridgewater Associates. Dalio employs an investment strategy that blends conventional diversification with "wagers on or against markets around the world" according to Bloomberg. Dalio's risk parity approach allows for both leverage and external diversification when investing, as well as short selling. This allows Dalio to use any asset combination he chooses when investing. Dalio's strategy uses an optimal risk target level as its basis for investing. This in contrast to first allocating capital and then achieving a risk target. Dalio implements this strategy by using leverage to evenly distribute exposure across various asset classes while maintaining the best risk target level. Dalio began using the term "d-process" in February 2009 to describe the deleveraging and deflationary process of the subprime mortgage industry as distinct from a recession, and subsequently incorporated the term into his investment philosophy. Dalio's exact investment portfolios are largely kept a secret from the outside world. This includes most employees as well as external investors, and only a dozen people within his firm understand how it trades at a given time.