Friday, March 08, 2013
In the Northeast, spring is in the air, and at Ivy League schools, kids are planning their postgraduate futures. But this year, many of the smart young finance things who used to flood to positions at name-brand banks in lower Manhattan are casting their sights elsewhere. It’s not a bank. It’s not in New York. And it’s not a century-old global institution with a patrician name.
It’s Bridgewater Associates. Based in Westport, Connecticut, and founded and led by a person who is equal parts investing savant and shaman, Bridgewater might best be described as an alternative alternative asset-management company. It’s the creation of Ray Dalio, who was memorably described in a great New Yorker profile by John Cassidy thusly: “He looked a bit like an aging member of a British progressive-rock group.” Big shots like Stephen Schwarzman of Blackstone and Steven Cohen of SAC Capital may garner the headlines. But in recent years Dalio and Bridgewater have ridden new investment flows and superior performance to become America’s largest hedge fund, with about $145 billion in assets.
Bridgewater, which has 1,300 employees, isn’t for ex-jocks or day traders. Rather, it tends to attract—and look for—self-styled intellectuals and deep thinkers who like constructing arguments as much as they enjoy constructing portfolios. It’s “the thinking Yalie’s destination,” as one recent Yale graduate put it. Undergrads at Harvard report that the scandal-free firm is more desirable than Goldman Sachs, previously the ne plus ultra for young grads on the make. “Bridgewater is very popular because it is one of the few hedge funds that will accept people right out of college,” says a Harvard undergraduate who interviewed with the firm. “Also, the hours tend to be better. In investment banking you’re working 100 hours a week, and at hedge funds it is more like 70.” (This student may be overestimating the amount of time employees of both investment banks and hedge funds spend working).
Economist Joseph Schumpeter, who invented the phrase “creative destruction,” analogized the upper strata of society as a hotel in which the guests are always checking in and out. That has been the case on Wall Street for the last many years. The list of blue-chip recruiters in 2006 would have included Lehman Brothers (bankrupt), Bear Stearns (essentially failed and merged into JPMorgan Chase), and Merrill Lynch (now a unit of Bank of America). The survivors—Goldman Sachs, JPMorgan Chase—are all shedding workers and bringing in smaller classes. Meanwhile, other companies have come up in the world. BlackRock, the bond giant, boasts more than $1 trillion in assets. Private-equity firms like the Blackstone Group and KKR, which weathered the storm, are continuing to transform from small partnerships into large institutions. They’re hiring.
Then there’s Bridgewater, whose workplace more closely resembles The Master than Wall Street; the trading day is like a long encounter session in which people learn about themselves, and then trade their way to prosperity.
The edge at most hedge funds is getting an informational edge, or using holdings to push for changes in management. Bridgewater, which manages money on behalf of public-employee pension funds like the Pennsylvania Public School Employees’ Retirement System, foreign sovereign wealth funds, and other institutions, has a different approach. Bridgewater is a macroinvestor, meaning it analyzes big-picture economic trends, data, and market behavior to come up with ideas about how to profit off the movement of stocks, bonds, and currencies all over the world. The strategy appears to be working: Bridgewater’s main fund has returned 14 percent annually since 1991, with only one losing year—an astonishing record. As The Economist noted, over the last several years, the hedge-fund industry at large has underperformed the S&P 500 index.
To keep its machine finely tuned, Bridgewater searches out young intellectuals in addition to hiring experienced workers. No surprise they recruit from the Ivy League. The company “recruited incredibly aggressively at Yale,” noted one recent Yale graduate. “They offered students who did not apply for their summer internship program $100 gift cards to sit in a focus group and explain why.” Students say they received several emails from the company—personally addressed to them from friends or associates who were at Bridgewater.
The interviews themselves have become legendary. “Really weird” and “very confrontational” were two phrases used by students to describe the on-campus interview. A candidate is likely to be put in a room with about seven people. Instead of being grilled about stock trades or economic issues, students will be asked to debate controversial topics like Roe v. Wade or gun control for an hour. “They wanted you to compete with each other,” said a Harvard undergraduate. “Unsurprisingly, quite a few members of the Yale debate team end up working there,” says the recent Yale graduate.
A Bridgewater spokesman said the company doesn’t disclose how many campuses it visits. “Hiring from college and M.B.A. programs has always been an important part of our hiring,” he said. As for numbers, there’s no typical minimum class size. “There is no quota. We will hire people we think are very talented and will be great contributors and a fit with our company.”
The company marches to a different drummer. When I approached Dalio, a jazz aficionado, at this year’s World Economic Forum in Davos, Switzerland, and asked to speak with him, I said: “I know you don’t do a lot of interviews because—” He completed the sentence: “Because we’re weird?” (I was actually going to say because Bridgewater is privately held and isn’t engaged in the constant grind of fundraising—but yes, Bridgewater does have a reputation for being weird.) I didn’t get the interview.
Dalio doles out life advice and investment returns in equal measure. He runs the firm according to the doctrine of what he calls “radical transparency.” Employees are consistently challenged to defend their views. Personal criticism of colleagues is encouraged, even compulsory. Meetings are taped. Dalio has laid out his principles of management in a 123-page, 210-point manifesto. To succeed at Bridgewater, you have to buy into the system. And it’s clearly not for everyone. Check out the lengthy comment thread about Bridgewater at the jobs site One Day One Job. Among the posts from anonymous former workers: “Once you accept the offer and go through the “orientation” process you will be judged and criticized nonstop. I only made it there for 4 months before my wife convinced me that money isn’t worth it.”
Bridgewater also sets itself apart geographically. It’s not in New York. It’s not even in Stamford, the satellite financial-service area, which allows for easy commutes from the city. Rather, it’s in Westport, a more distant, but lovely, suburb (I live there), filled with 40-something and 50-something professionals, rather than 20-something finance newbies. The company’s headquarters are tucked in a wooded area in the northern part of town. Unless you knew it was there, you wouldn’t know it was there. Many of the young hires share rental apartments in the area during the week and live in Manhattan. The company runs buses back and forth from New York every day.
Bridgewater has added high-profile executives in recent years, including former assistant attorney general James Comey and David McCormick, a former George W. Bush Treasury aide. The company last year announced it is considering plans to build a lavish new headquarters in Stamford.
But it’s not simply the location or even the money that makes Bridgewater trendy. This is a distinction that may not seem like much to outsiders, but Bridgewater isn’t really part of the crisis-era financial system. Bridgewater wasn’t involved in the bailouts, took no Troubled Asset Relief Program money, didn’t securitize mortgages, doesn’t borrow from the Fed, and hasn’t been implicated in any insider-trading scandals.
Ivy League kids still want to make money and are still drawn to the financial-services industry. Last December I guest-taught in a session of an undergraduate course on finance and economics at Yale, and virtually all the students in the class expressed an interest in working in finance. But they didn’t want to be seen as embracing the negative aspects of finance.
For years, Goldman had the greatest cachet and mystique among this crowd. No longer. If you’re 22, notes Kevin Roose, “all your friends are skeptical of the banking industry.”
“If you tell someone you do finance, they’ll say ‘You sold your soul,’” says a Harvard undergraduate. “There’s been a big surge in interest in startups, computer science, and entrepreneurship. They call it the Zuckerberg effect.”
With its intensely intellectual work climate, flat hierarchy, and lack of attachments to the tainted sectors of the financial complex, Bridgewater offers bright young things a way to work on Wall Street without really being part of it. Which is nice work if you can get it.
Posted by Bud Fox at 9:10 AM