A recent note from Bridgewater Associates to its clients revealed that the hedge fund would be laying off a substantial number of employees. The company, which currently operates about $150 billion in assets under management (AUM), making the it the largest hedge fund by volume in the world, has previously been able to weather the difficult times facing hedge funds across the industry surprisingly well. In fact, Ray Dalio's fund brought in a substantial sum of new investments in recent months. So why might the fund be cutting the number of its employees, particularly at a time in which it seems to be standing out among its competitors for bringing in new investment dollars?
Effects of Rapid Growth
One possible reason that Bridgewater may be planning to trim the number of its employees is the fact that the firm has grown in size by about 10 times in a period of just over a decade. In 2003, the company employed about 150 different people. By 2016, that number has grown to about 1700. Such a dramatic growth over a relatively short period of time has likely left Bridgewater scrambling to catch up organizationally. It may be that the company is interested in eliminating positions in an effort to remove bureaucratic standstills as best it can.
A Tough Year for Most Hedge Funds
2016 has been a difficult year for nearly all of the hedge fund industry, and Bridgewater is no exception. Though the company has posted impressive inflows of investor capital, that does not change the fact that its primary fund, Pure Alpha, has reported losses of about 9.4% on the year through the end of August. Nonetheless, Bridgewater is still outperforming many of its competitors, with its passive All Weather fund managing to gain over 13% from the beginning of the year through the end of August as well. Still, in its note to clients, Bridgewater stressed that the changes in organization and employee structure would not be because of overall fund performance, as executives assured investors that the firm's financial position was solid.
Reorganizing Under a New Leader
Ray Dalio, the billionaire founder and leader of Bridgewater, expressed in 2011 his plans to shift leadership responsibilities to a new executive officer by 2021. In recent months, developments have taken place that have pointed toward that shift; for instance, in March the company hired Jon Rubenstein, formerly an executive at Apple, Inc. (AAPL) , to a leadership position. It may be possible that the company is seeking to restructure various levels of its organization alongside the current plans to shift over leadership. At age 67, Dalio may be looking to phase out some of his responsibilities.