How does the world’s largest hedge fund actually make its money?

How does the world's largest hedge fund actually make its money?

“What was he talking about?” He vented his anger later.

Financial analyst Jim Grant, the self-proclaimed “Prophet of Reason”, watched the interview with surprise. He had a mysterious newspaper, Grant’s Interest Rate Observer, which was popular in the sense that many serious investors claimed to read it.

Mr. Grant had privately pondered deep questions about Bridgewater for years. He appointed his top deputy to investigate. He extensively examined the company’s public filings, and spoke confidentially to anyone who might have a clue as to what was going on. “It was filled with all kinds of people blinking and nodding,” Mr. Grant recalled, “that something was really wrong.” In October 2017, Mr Grant devoted an entire issue of his publication entirely to Bridgewater and the subjects of “distraction, sycophancy” and “mystery”.

The newsletter claimed several issues. Shareholders of Bridgewater’s parent company – a group that includes employees and customers – did not automatically receive copies of the firm’s financial statements. The newspaper said five different Dalio family trusts own “at least 25 percent but less than 50 percent of Bridgewater, which seems mathematically difficult.” According to public disclosures, the hedge fund lent money to its own auditor, who the longtime analyst described as erratic and unusual. The newsletter concluded, “We will go to a limit, Bridgewater is not for the ages.”

At 8:30 p.m. on the day the report was published, Mr. Grant sat on the couch at home with his wife to watch a New York Yankees game. When his home phone came from an unknown Connecticut number, Mr. Grant let the call go to voice mail. It wasn’t until about half an hour later that his wife heard a beeping sound in the distance. She went ahead and pressed the play button on the machine to put the message on speakerphone. Mr. Dalio’s voice, measured and calm, was heard:

According to Mr. Grant, Mr. DeLeo said, “I’m not sure you’ve seen the current issue of Grant.” Mr. Dalio’s message continued for about half an hour, detailing his complaints about the piece.

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