Wednesday, July 27, 2016

Bridgewater's Culture of Fear?

Alexandra Stevenson and Matthew Goldstein of the New York Times report, At World’s Largest Hedge Fund, Sex, Fear and Video Surveillance:
Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, likes to say that one of his firm’s core operating principles is “radical transparency” when it comes to airing employee grievances and concerns.

But one employee said in a complaint earlier this year that the hedge fund was like a “cauldron of fear and intimidation.”

The employee’s complaint with the Connecticut Commission on Human Rights and Opportunities, which has not been previously reported, describes an atmosphere of constant surveillance by video and recordings of all meetings — and the presence of patrolling security guards — that silence employees who do not fit the Bridgewater mold.

Hedge funds tend to be a highly secretive bunch, yet even within their universe Bridgewater stands out. The allegations, as well as interviews with seven former employees or people who have done work for the firm and a filing by the National Labor Relations Board, open a window into the inner workings of a $154 billion company that, despite its mammoth size, remains obscure. The firm is governed by “Principles” — more than 200 of them — set out in a little white book of Mr. Dalio’s musings on life and business that some on Wall Street have likened to a religious text.

Secrecy at Bridgewater is so tight that in some units employees are required to lock up their personal cellphones each morning when they arrive at work.

In his complaint, Christopher Tarui, a 34-year-old adviser to large institutional investors in Bridgewater, contends that his male supervisor sexually harassed him for about a year by propositioning him for sex and talking about sex during work trips.

After he complained last fall, Mr. Tarui said, several Bridgewater top managers confronted him and sought to pressure him to rescind his claims. One manager, he said, accused him of lying and said that he was “blowing this whole thing out of proportion.” These and other allegations in the complaint could not be independently verified.

Mr. Tarui said he remained silent for many months about the harassment out of fear the incident would not remain private and would impede his chances for promotion at the firm, which is based in Westport, Conn. “The company’s culture ensures that I had no one I could trust to keep my experience confidential,” he said in the complaint, which was filed in January.

Jointly, Bridgewater and Mr. Tarui asked in March to withdraw the complaint from consideration by the Connecticut human rights commission. No reason was given by either party for the request, which halted the investigation. Bridgewater’s employment agreement requires employees to settle disputes through binding arbitration.

In a related action, the National Labor Relations Board recently filed a separate complaint against Bridgewater. The new complaint says that the company “has been interfering with, restraining and coercing” Mr. Tarui and other employees from exercising their rights through confidentiality agreements that all employees are required to sign when they are hired.

Both Mr. Tarui’s harassment complaint and the labor board’s filings were obtained by The New York Times through Freedom of Information Act requests.

“While it is difficult for our management team to independently judge the merits of this claim, we are confident our handling of this claim is consistent with our stated principles and the law,” Bridgewater said in an emailed statement. “We look forward to operating through a legal process that brings the truth to light.”

Mr. Tarui’s assertions about Bridgewater’s surveillance culture and its chilling effect were echoed in interviews with seven people who are former employees or who have done work for the firm. The people were not permitted to speak publicly because of the confidentiality agreements they had signed with Bridgewater.

It is routine for recordings of contentious meetings to be archived and later shown to employees as part of the company’s policy of learning from mistakes. Several former employees recalled one video that Bridgewater showed to new employees that was of a confrontation several years ago between top executives including Mr. Dalio and a woman who was a manager at the time, who breaks down crying. The video was intended to give new employees a taste of Bridgewater’s culture of openly challenging employees and putting them on the spot.

The firm no longer shows the video, the people said.

These former employees said other behavior had raised concerns within the company. At an off-site retreat in 2012 with several top executives — including Greg Jensen, Bridgewater’s co-chief investment officer — employees got drunk and went swimming naked, prompting complaints from some other employees in attendance.

Founded in 1975, Bridgewater manages billions of dollars for some of the biggest pension funds and sovereign wealth funds in the world. Its founder, Mr. Dalio, 66, is a celebrity in his own right — he has been a speaker at exclusive conferences like the World Economic Forum in Davos, Switzerland, and recently attended a White House state dinner.

Steady performance for years has led institutional investors around the world to give Bridgewater money. For a time, James B. Comey, the current director of the Federal Bureau of Investigation, was the company’s general counsel, adding to its luster.

But over the last two years, the firm has lost billions of dollars for investors as a result of mixed performances and has begun to slow its hiring. And questions have arisen about Bridgewater’s unusual culture.

Mr. Tarui has been on paid leave from the firm since Jan. 6, two days before he filed his harassment complaint. The labor relations board said in its separate complaint that Mr. Tarui was suspended after he “threatened to file a charge with the board.”

Douglas Wigdor, Mr. Tarui’s lawyer, declined to comment and said his client would not comment.

Bridgewater, in a legal filing with the labor relations board, said its employment agreements were “tailored specifically to protecting Bridgewater’s legitimate business concerns, including confidentiality interests that are unique to the financial services industry.”

A Bridgewater employee for five years, Mr. Tarui was responsible for meeting with large public pension funds. He previously worked for Pimco, the bond giant based in Newport Beach, Calif.

In his complaint, Mr. Tarui said that the sexual advances began during a business trip to Denver in May 2014, when his supervisor “caressed the small of my back” while the two men were seated on a couch in the supervisor’s hotel room. Mr. Tarui said the incident made him feel uncomfortable and he immediately left the room.

But the supervisor continued to pursue him, Mr. Tarui said in his complaint. On one occasion, he said, his supervisor confided in him that he had an “itch to scratch,” and then asked Mr. Tarui whether he had ever “thought about being with other men.” Mr. Tarui said he told his supervisor he “was not wired that way.” But his supervisor persisted, Mr. Tarui said, adding that his boss then “specifically asked whether I would consent to having a sexual experience with him.”

Mr. Tarui said he again rejected his supervisor’s advances but his supervisor continued to make overt and subtle sexual overtures well into last summer.

Mr. Tarui said in the complaint that he did not report the conduct out of fear it would become public because of the firm’s policy of videotaping confrontations between employees.

Eventually, Mr. Tarui did complain after his supervisor gave him a bad job performance rating even though he had been promoted and given a pay raise just a few months earlier. He said in the complaint that during a meeting in November 2015, he told a Bridgewater human resources representative and another top manager about the repeated sexual harassment by the supervisor.

As is the case with every meeting at Bridgewater, the meeting was recorded. So was a later meeting with several top executives at Bridgewater including David McCormick, the firm’s president. Mr. Tarui said recordings from those meetings were “widely shared” with managerial employees at Bridgewater.

The firm promised an investigation. But in his complaint Mr. Tarui said that Bridgewater’s management tried to persuade him to withdraw his allegations.

Other Bridgewater employees have complained internally about unusual antics at a corporate outing, saying that it went beyond what was acceptable behavior at a work event.

After the 2012 retreat, which was attended by more than 30 employees, several who had attended complained that they had felt uncomfortable at the excessive drinking and skinny-dipping, three former employees said. The retreat also provoked internal quarreling because several people who attended poked fun at Mr. Dalio during a campfire, these same people said.

An employee who helped arrange the retreat was later fired by Bridgewater, these people said.
The National Labor Relations Board alleges that Bridgewater “has been interfering with, restraining and coercing” employees through its strict confidentiality agreements. You can read the complaint here.

Wow! Where do I begin? I heard about this story on CNBC this morning and thought to myself:  "And the hits just keep on coming at Bridgewater."

It was just last week that I wrote a long comment on Hard Times in Hedge Fundistan where I went over Bridgewater's latest performance stating the following:
In January 2013, I openly asked whether the world's biggest hedge fund is in deep trouble, stating the following:
When I invested in Bridgewater over 13 years ago, it was just starting to garner serious institutional attention. Now, the whole world knows about Ray Dalio, Bob Prince and Bridgewater's approach. When I hear investors telling me investing in Bridgewater is a "no-brainer," I get very nervous and start thinking that the firm's success has become its worst enemy.

Let me be clear, I've met Ray Dalio, Bob Prince and many others from Bridgewater. There is no doubt they run a first-rate shop, striking the right balance, and deserve their place among the world's biggest and best hedge funds. But in this industry success is a double-edged sword and I don't like seeing hedge fund managers plastered all over news articles and engaging in silly deals.

Also, as I explained yesterday, there are good reasons to chop hedge fund fees in half, especially for these large quantitative CTAs and global macro funds. Why should Ray Dalio or anyone else managing over $100 billion get $2 billion in management fees? It's ridiculous and I think institutional investors should get together at their next ILPA meeting and have a serious discussion on fees for large hedge funds and private equity shops.

In my opinion, these large funds should charge no management fee (or negligible one of 25 basis points) and focus exclusively on performance. The "2 & 20" fee structure is fine for small, niche funds that have capacity constraints or funds just starting off and ramping up, but it's indefensible for funds managing billions as it transforms them into large, lazy asset gatherers, destroying alignment of interests with investors.

Now, one can argue that Bridgewater is becoming the next Pimco, a mega asset manager which successfully manages a lot more in assets. That's fine but then why charge 2 & 20?
Earlier this year, I criticized Bridgewater's radical transparency, stating the following:
[...] the bigger problem I have with this "radical" view of how people should interact in a company, especially a large hedge fund full of competitive individuals is on philosophical and ethical grounds. Let me explain. Ray Dalio may have mastered the machine but people aren't machines. His mechanistic/ deterministic view on markets and how the economy and world work cannot be translated into the way people should or can realistically interact with each other. 

In short, while you can code many relationships in the economy and financial markets, human interactions are far more complex. People aren't machines and when you try to impose some mechanistic deterministic view on how they should interact with each other (in order to control them?), you're bound to stifle creativity and breed contempt and an atmosphere of animosity, especially when the fund underperforms.

What else? I believe what ultimately matters is what Bridgewater employees are thinking and saying when the cameras and iPads are off or when they leave the shop. Bridgewater can tape all the meetings they want but Ray Dalio can't read minds and he doesn't know what is being said in private when employees are venting to each other or their partners at home (unless he's secretly taping them at the workplace and their homes, which is a sign of disrespect, not to mention it exhibits traits of a delusional paranoid tyrant).

Also, Gapper is right, there's an elitist (and narcissistic) air to all this. They hire a bunch of Ivy League kids and if after 18 months they manage to "get to the other side" of their emotions they then  become part of the Bridgewater "Navy SEALs," the select few who have mastered their emotions and are able to view things without their emotions getting in the way.

It's such nonsense and while it's great for marketing purposes, when the fund starts losing money, it exposes the shortcomings of this elitist mechanistic approach. Worse still, it leaves no room for real diversity at the workplace (how many people with disabilities does Bridgewater hire?) and you end up with a bunch of emotionally challenged robots at "the other end" who follow rules to conform to what their master wants, not because they truly believe or want to live by these ridiculous rules governing their every interaction.

Sure, Bridgewater is a great hedge fund, one of the best. But in my opinion, it's a victim of its success and it's gotten way too big and in order to control this explosive growth, they've implemented this 'radically transparent' cultural approach without properly thinking through what this entails or whether it stifles diversity, creativity, camaraderie and cooperation.  
As you can see, I hold nothing back when it comes to my thoughts and truth be told, I actually like Bridgewater a lot but I have zero tolerance for nonsense, especially when it comes from an elite hedge fund managing hundreds of billions of pension and sovereign wealth fund assets.
I also added this tidbit:
I agree with Jagdeep Singh Bachher, the former CIO of AIMCo who is now the CIO of the University of California regents, the management transition at Bridgewater just doesn't feel right.

Let me also publicly state this: I think Greg Jensen should leave Bridgewater to start his own global macro hedge fund and his seed investor should be none other than Ray Dalio.

This might sound odd but it will reassure investors and it will show the world that Ray Dalio isn't a power-hungry tyrant who needs to control all his employees through "radical transparency" or any other coercive means (if he had a fallout with Greg Jensen, he should send him off with the money he's owed and seed his new macro fund just like Soros did with his protege who enjoyed the biggest launch ever).

Like I said, I don't mince my words, and if you think I'm too critical of the world's biggest hedge fund, you should read the rest of this comment because unlike Bridgewater, the majority of hedge funds absolutely stink and should be shut down immediately.
After reading the latest New York Times article on Bridgewater, I now see things are a lot more serious than I thought. If you are an institutional investor of Bridgewater, you have to be asking yourself a lot of questions regarding this hedge fund's "radical" culture.

Even if you dismiss Mr. Tarui's claims (and you definitely shouldn't), were his allegations of sexual harassment properly handled internally? In my opinion, Bridgewater's senior management absolutely screwed up handling his claims. Instead of separating him from his supervisor immediately to conduct a proper internal investigation, they videotaped the meeting with top executives and shared it widely with other "managerial" employees.

Not only is this an absolutely stupid move on their part, it violates the rights of employees who may have a legitimate case of sexual harassment that needs to be dealt properly, swiftly and with absolute discretion to preserve the right of employees to work in an environment where they are not subjected to any sexual harassment whatsoever from their male or female supervisors.

Absolute discretion with a sexual harassment charge is also critical to protect the rights of a supervisor or another employee who may be wrongfully accused of a frivolous sexual harassment claim which is done out of spite and not based on facts. The last thing you want to do is record these meetings and share them with others as to bias their views in any way.

I say this because I've also seen frivolous and dubious claims of sexual harassment by employees with an axe to grind which were not based on cold, hard facts but made out of spite or some delusional misconception in their head that their boss or colleague is "in love with them and acting inappropriately".

But let me be clear about something, there should be zero tolerance for sexual or any harassment in the workplace. I don't care if it's a homosexual or heterosexual male or female boss, if they use power to obtain sexual favors, it's grounds for an immediate dismissal if the claims are legitimate.

The minute someone makes any sexual harassment claim, there has to be a process which is fair, rigorous and respects the rights of all parties involved. Frivolous sexual harassment claims can ruin someone's career but if there is cause for concern, it must be dealt swiftly and properly.

More often than not, sexual harassment in the workplace goes on until someone has the courage to step up and speak out. The resignation of Roger Ailes from Fox News is just the latest high profile case to shine the light on this hidden scourge.

Now, imagine for a second if Ray Dalio or Greg Jensen were accused of sexual harassment. Would these allegations be taken seriously internally or swept under the rug? I must admit, that offsite retreat attended by several top executives including Greg Jensen where employees got drunk and swam naked is concerning because it shows a total lack of judgment (all "good clean fun" or just plain dumb, dumb, dumb bordering on insane!). It also makes me think maybe Jensen isn't worthy of running his own macro fund because that should never have happened under his watch.

More importantly, I'm starting to believe Bridgewater's "radical transparency" is a failed experiment which is negatively impacting performance and culture at this mammoth fund.

Albert Einstein once said "insanity is doing the same thing over and over again expecting different results." I think Ray Dalio and the top executives at Bridgewater need to ask themselves some very hard questions about whether their fund is on the right track and whether there is a cultural crisis going on there. Because from where I'm standing, things are going from bad to worse.

[If Bridgewater wants to invite me to address all its employees on this and other matters in an open, critical and constructive manner, I'd be more than happy to share my no holds barred views and report on them, for a fee of course. I have better things to do with my time than spend a day or two in the woods in Connecticut to discuss Bridgewater's cultural deficiencies. Then again, why invite me when you can read my thoughts on my blog?]

Lastly, while Bridgewater is facing its internal cultural crisis, the perfect hedge fund predator, Steve Cohen, has a new mantra: better to be safe than sorry:
Cohen's Point72 Asset Management is taking extra precautions to guard against wrongdoing after Cohen's predecessor hedge fund, SAC Capital Advisors, was shut down for insider trading.

Vincent "Vinny" Tortorella, a cheery Italian-American and former federal prosecutor, is the man charged with the task, having taken over as head of Point72's compliance and surveillance unit in 2014.

Cohen has given Tortorella a blank check to do whatever it takes to keep the firm straight, including an investigative team of more than 50 staffers, including ex-federal agents who track any potential rumors of wrongdoing – both at Point72 and at competitors.

It's a proactive, rather than reactive, strategy, Tortorella told Business Insider in an interview over lunch in Manhattan. Tortorella was accompanied by two of Cohen's in-house public relations pros, also another key to his firm's makeover.

Before the insider trading investigation at Visium Asset Management became public earlier this year, for instance, Point72 put a ban on hiring those who'd recently worked there on the investment side.

Visium isn't the only firm Point72 has banned, either. Tortorella declined to say who else made the list and when exactly the Visium ban came into effect.

Point72's Visium ban contrasts with its hedge fund rivals. Ken Griffin's Citadel, for instance, recently swooped up about 17 traders from one of Visium's funds. Lombard Odier and Caxton Associates also hired Visium traders. The portfolio managers appear to have worked at Visium's global fund, a multisector equity fund that wasn't named in regulators' charges.

Reps for Citadel declined to comment, and Lombard Odier and Caxton didn't respond.

Point72 has good reason to keep strict protocol. The Securities and Exchange Commission in 2013 shut down its $16 billion predecessor, SAC Capital, banning the hedge fund from managing outside money. Cohen pleaded guilty to securities fraud and launched Point72 a year later as a family office to run his billions of wealth. A Cohen-led organization can accept outside investors' money again in 2018.

Since then, Cohen's firm has been beefing up its compliance.

"This can't ever happen again," Cohen told Tortorella when he hired him in 2014, Tortorella said.

The effort hasn't come cheap.

Cohen gave Tortorella veto powers on any potential hire, and Tortorella has used it on potential staffers who would likely have made major money for Point72. The cost of running Tortorella's team, which has grown by about 50% in the last two years, also comes to tens of millions of dollars a year, Tortorella said.

Point72's in-house surveillance team has, on occasion, fired employees who fell out of line, too. For instance, Point72 has restrictions on trading in personal accounts, and requires disclosure. Point72 fired an employee who hid a secret account.

Many in the industry scorn personal trading for the conflicts of interest that arise when traders make investments for themselves rather than for the firm.

Coincidentally, this was also an issue at Visium, where the founder, Jake Gottlieb, made a lucrative bet for himself on a trade the flagship fund also made, Business Insider reported last month. It's unclear if regulators are looking into that trade.

Other measures narrow the flow of info that Tortorella and his team have to sort through in tracking its traders. Tortorella banned instant messaging for analysts and portfolio managers, for instance. Data spying software also helps his team pick through huge flows of information.

Tortorella's team also watches how traders source their investments, such that a trader needs to back up how he or she got every piece of info leading up to a decision, Tortorella said.

Point72 isn't the first hedge fund that Tortorella has been tasked with monitoring.

He spent three and a half years at New York hedge fund Coatue Management as head of proprietary research and general counsel. Before that, he was the chief operating officer and general counsel at Guidepoint, an expert network, and a federal prosecutor in the Department of Justice's criminal division from 2004 to 2008.

The experience has given him a theory about who tends to commit insider trading.

It's not the best investors who are cheating, he said. It's those who are trying to keep their heads above water.
If you can't fight the law, use your billions to buy former federal prosecutors and give them carte blanche to enforce the laws internally.

Why is Steve Cohen doing this? Because he's gearing up to manage outside money once again and in this business, perception matters. The last thing investors want is to invest in some hedge fund manager who plays fast and loose with the law, exposing them to headline risk they can live without.

Cohen isn't stupid, he's a shark and one of the best traders in the world. He has one more shot to come back strong and manage external money and he doesn't want to screw it up because he wants to be remembered as one of the best hedge fund managers of all-time (and collect 2 & 20 on billions from public pension funds and sovereign wealth funds desperate for yield).

Interestingly, Cohen has doubled down on London after Brexit and he's betting as much as a quarter billion dollars that mechanical engineers and nuclear scientists can come up with market-beating mathematical models in their spare time:
The investment of as much as $250 million will go to a hedge fund launched by Boston investment firm Quantopian. That fund provides money to do-it-yourself traders who come up with the best computerized investing methods, giving a share of any profits to the creators.

Mr. Cohen, chief executive officer of Point72 Asset Management LP, is also making an undisclosed investment in Quantopian itself through his family-office venture arm Point72 Ventures.

The billionaire’s new commitments are part of a broader push in the money- management world to embrace quantitative investing, which relies mainly on math-based models to bet on statistical relationships or patterns in stocks, bonds options, futures or currencies.
I have a couple of people to introduce to Mr. Cohen and Quantopian. Just don't tape the meetings, let them do their work, and get out of the way and let them make you a lot richer than you already are.

The difference between Steve Cohen and many others is he's always thinking like an entrepreneur and thinking outside the box. Pension funds and sovereign wealth funds can learn a lot from his approach.

Below, CNBC reports one Bridgewater employee filed a complaint earlier this year, saying the hedge fund is like a 'cauldron of fear and intimidation.'

And CNBC's Kate Kelly reports Steve Cohen's newly-formed venture capital fund is backing algorithmic trading company Quantopian.

Lastly, I embedded a great clip on preventing sexual harassment in the workplace. It really is up to everyone to do their part in preventing any type of harassment in the workplace.

Update: On Thursday morning, Ray Dalio responded calling the New York Times article a 'distortion of reality' (added emphasis is mine):
Although we continue to be reluctant to engage with the media, we again find ourselves in the position of being left with no choice but to respond to sensationalistic and inaccurate stories, both to make clear what is true and to do our part in fighting against the growing trend of media distortion. To let such significant mischaracterizations of our business stand would be unfair to our hard-working employees and valued clients who understand the reality of our culture and values.

While we all would hope that we could count on the Times for accurate and well-documented reporting, sadly, its article "Sex, Fear, and Video Surveillance at the World's Largest Hedge Fund" doesn’t meet that standard. In this memo we will give you clear examples of the article’s distortions. We cannot comment on the specific case raised in the article due to restrictions we face as a result of ongoing legal processes and our desire to maintain the privacies of the people involved for fear that they too will be tried in the media through sensationalistic innuendos. Nonetheless, we can say that we are confident that our management handled the case consistently with the law and we look forward to its successful resolution through the legal process.

To understand the background of this story, you should know that the New York Times reporters never made a serious attempt to understand how we operate. Instead they intentionally strung together a series of misleading "facts" in ways they felt would create the most sensationalistic story. If you want to see an accurate portrayal of Bridgewater, we suggest that you read examinations of Bridgewater written by two independent organizational psychologists and a nationally-renowned management researcher. (See An Everyone Culture by Robert Kegan; Learn or Die by Edward Hess; and Originals by Adam Grant.)

Rather than being the “‘cauldron of fear and intimidation’” the New York Times portrayed us as, Bridgewater is exactly the opposite. Bridgewater is well known for giving employees the right to speak up, especially about problems, and to make sense of things for themselves. Everyone is encouraged to bring problems to the surface in whatever ways they deem to be most appropriate. To be more specific, our employees typically report their business problems and ideas in real time through a public “issue log” and a company-wide survey that is administered quarterly. More sensitive matters are reported through an anonymous “complaint line,” and all employees have access to an Employee Relations team charged with being a closed, confidential outlet outside of the management chain for handling issues of a personal nature.

The New York Times portrayed our taping of meetings as creating “an atmosphere of constant surveillance . . . that silence[s] employees who do not fit the mold.” It is well known that Bridgewater’s taping of meetings is instead done to enable employees to hear virtually all discussions happening at the firm for themselves. We make these tapes available to employees because we believe strongly that in order to have a real idea meritocracy, people need to see and hear things for themselves rather than through the spin of others. We also believe that bad things happen behind closed doors so that such transparency is healthy.

While we acknowledge that this culture of openness is not for everyone, our employees overwhelmingly treasure this way of operating. In our most recent anonymous survey, employees rated their agreement with the statement “I believe that Bridgewater’s culture and principles are key to its success” a 4.4 out of 5. Many of our employees say they wouldn't want to work anywhere else because they so appreciate our unique idea meritocracy in which meaningful work and meaningful relationships are pursued through radical truth and transparency. The New York Times article doesn’t square with common sense. If Bridgewater was really as bad as the New York Times describes, then why would anyone want to work here?

The New York Times said that some employees “are required to lock up their personal cellphones each morning when they arrive at work” which made it sound like employees can't carry their phones around with them like employees at other companies do. This is wrong. The truth is that the vast majority of our employees freely carry around their cell phones; the only place they can't is on our trading floor, where cell phones are prohibited. This policy is to protect the confidentiality of trades in order to protect our clients’ money.

The New York Times said that the company’s culture makes it impossible for employees to have matters handled confidentially. That is also wrong. As stated above, we have clearly defined channels for reporting private matters that have been utilized by many employees over the years. These matters have always been kept confidential.

The New York Times said “over the last two years, the firm has lost billions of dollars for investors as a result of mixed performance.” That is wrong as well. In 2015, our Pure Alpha fund had its 15th consecutive year of positive returns. This year, year-to-date, we have made $1.3 billion for our clients across our strategies. While that is less than expected, it is within our stated range of expectations. Notably, our clients who know us well have demonstrated their confidence in us by investing $12 billion in new assets over the last seven months.

Concerning legal matters, because Bridgewater is culturally committed to the pursuit of truth, we have always had a strong preference to not “settle” claims but rather to be judged by the appropriate legal or regulatory system, even though that is not the expedient thing to do. Like many organizations, we encounter frivolous claims made in an effort to extract financial gain. Most companies prefer to settle them because it saves time and legal costs—and avoids the sort of distorted publicity that we are now encountering. We choose to contest them instead. At the same time, we have clear policies and standards of behavior, and when we discover behavior inconsistent with them, we act decisively. We are proud to say that in our 40 year history we have had no material adverse judgments.

We are far from perfect and we like to raise our imperfections to the surface so that we can deal with them honestly and transparently, while also protecting personal privacy. This approach is controversial and gives the media a lot of material to pick from to mischaracterize, but we believe that in the long run it is the best way for improving. It has been the biggest reason for our success. We look forward to continue being judged by our employees, our clients, and the legal and regulatory parties who are responsible for overseeing our behaviors, rather than by the media.
I think it's only fair to post Ray Dalio's response to the New York Times article as he raises good points and has a right to defend his shop's unique culture and the organization he and Bridgewater employees have built into a global alpha powerhouse over many years.

Still, I have some questions regarding parts of the article that Ray didn't address (like that offsite retreat) and we shall see how this all plays out in the months ahead. If you have any comments, you can reach me at LKolivakis@gmail.com.



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