A Wall Street billionaire wants to come back to the giant he built. He may not be welcome

“Take me out,” he told Bridgewater executives at the time, according to people present at the meetings and documents reviewed by The New York Times, “and get what you deserve,” a threat that implied the firm would fall apart without him.

The internal strife has become an unwelcome distraction at a firm that manages $USUS125 billion for pension funds, sovereign wealth funds and other sizable investors from around the world, including China and Australia — many of whom Dalio personally wooed.

This account of friction between the firm and its founder is based on interviews with 10 current and former Bridgewater employees and advisers, who sought anonymity to speak freely about the fissures.

This year, Dalio raised the idea of the new fund with Bar Dea, who shared it with Bridgewater’s board. Dalio, who remains a director, was the only one to speak in favour of his own idea, according to three people with knowledge of the discussion. The board swiftly dropped it. Dalio declined to comment on the board discussions or on his suggestions to Bar Dea since October.

If Dalio gets his way, he will essentially be competing with those to whom he ceded control, giving the firm’s investors a choice between backing the Bridgewater founder’s ideas or those of his successors.

Bridgewater, which Dalio started in his two-bedroom apartment, is a so-called macro investor, meaning it tries to predict global economic moves. In the last three months of 2022, the company’s main fund, Pure Alpha, shed around two-thirds of its annual gain. It also lost money in the first half of 2023, people with knowledge of the performance said, despite a bumper period for stocks. Bridgewater’s assets under management have fallen to around 25 per cent below their peak, according to filings.

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Dalio is well known for his confrontational management approach, called “Principles,” that was made famous in his bestselling autobiography of the same name. In accordance with that style, which he calls radical transparency, Dalio has a history of upbraiding employees at Bridgewater through taped trials and case studies, as well as rating junior and senior staff members with a complicated performance metrics system.

He even made headlines this spring for clashing with a neighbour over a rooftop addition to his family’s loft in New York’s SoHo neighbourhood.

Bar Dea, 42, is less well known. A former major in the Israeli military, he joined Bridgewater in 2015 and rose through its managerial ranks, helping run the firm’s operations, which are separate from the firm’s core business — what it calls its “investing engine.” He made allies, however, with some of Dalio’s longtime deputies, including Bob Prince and Greg Jensen, both of whom held the title of co-chief investment officer alongside Dalio. Prince and Jensen are also billionaires thanks to their decades-long tenures at the hedge fund.

While Dalio was still in charge, the three men, in myriad conversations relayed to others who were not authorised to repeat them publicly, shared an increasingly pessimistic view of his investment acumen. Bridgewater was flat in 2019 — a banner year for stocks overall — and plunged further at the start of the pandemic, having kept its bets unchanged.

Roughly three years ago, the three men presented Dalio with an incentive to exit, according to people with knowledge of the negotiations. If he agreed to surrender his titles of co-chief investment officer and CEO of Bridgewater, Prince and Jensen would take on additional personal debt to buy out Dalio’s majority ownership stake.

Prince took on a particularly heavy load, eventually agreeing to pay Dalio enough for Prince to become the largest owner of Bridgewater, partly in exchange for Dalio’s ceding his formal investment roles at the firm in favour of a new investment committee in which his power would be diluted, the people said.

When the firm produced impressive investment gains for a two-year stretch beginning in mid-2020, the hedge fund told investors that it was because of that new investment committee, in which Dalio had no day-to-day role.

Fleischmann, the Bridgewater spokesperson, said that in the three years since the creation of that new committee, Bridgewater’s flagship fund had produced an average annual return of 10 per cent, after fees.

Investment performance hasn’t been the only issue between Dalio and his successors. At one point during the long back-and-forth over his retirement package, he asked his former firm to pay millions of dollars to license software that he helped design that rates employees in an array of personality categories that Dalio himself helped design, four people briefed on the request said.

Bar Dea beat back the request, calling it unjustified, given that few, if any, other companies had adopted the software. Bar Dea considered not giving Dalio an office after his retirement, though the founder eventually received one.

The bigger price was to negotiate Dalio’s exit. The veteran investor, worth an estimated $US19 billion, asked for billions of dollars more in payments to pare back his ownership stake. Bridgewater agreed to pay Dalio recurring annual payments of $US1 billion under an exit package, the Times previously reported.

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Even after Dalio and his successors agreed on that price, people involved in the negotiations said, they still weren’t certain Dalio would sign until that October morning when he finally did.

This article originally appeared in The New York Times.

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