Ray Dalio, who runs the world’s largest hedge-fund firm, the $130 billion Bridgewater Associates, is in danger of losing his hard-won serenity.
Dalio, known for practicing transcendental meditation and creating a cult-like atmosphere at the Westport, Conn., firm, is just weeks away from stumbling to a loss for the year.
The loss comes just 12 months after Dalio achieved near-genius status for doing what few hedge-fund titans have done: chalking up two back-to-back years of huge double-digit gains in his main macro fund.
Now, looking to make a comeback, Dalio this week predicted that interest rates would rise in the latter part of 2013, while suggesting any fiscal deal would depress the economy.
“The biggest opportunity will be shorting bond markets around the world,” said Dalio.
The 63-year-old guru’s bearish comments on markets, made at a New York conference this week, were credited by some traders for the stock market’s downturn that day.
Dalio added that he was “probably due for missing” the call in the interest rate turn.
The investor, with a personal wealth valued at roughly $13.9 billion, even prefaced his prediction by saying, “He who lives by the crystal ball is destined to eat ground glass,” paraphrasing a famous quote by former Nixon Assistant Treasury Secretary Edgar Fiedler.
No doubt Dalio has been eating a few shards this year. His biggest macro fund, Pure Alpha II, could have its first losing year since 2000 — unless he turns it around this month.
After gaining 45 percent in 2010 and 25 percent in 2011, Bridgewater’s Pure Alpha II is still slightly underwater through November, losing 0.5 percent, according to investors.
Macro hedge funds like Bridgewater try to profit off geopolitical trends, but most have had a difficult time divining the future since governments intervened in the markets so heavily after the crash of 2008.
“The rules of the game have changed, and it has caught a lot of players wrong-footed,” said one macro player.
For the past two years, Bridgewater distinguished itself from the crowd, but earlier this year it was caught off guard by a rally in the euro.
It was long the dollar when both the euro and the yen rallied, according to a source knowledgeable about the firm, sending the fund down almost 3 percent for the first half of the year.
To be sure, investors aren’t worried. “Ray Dalio has for two years been screaming to expect a very different return next year,” said one, who added that the change was “natural” after a few great years.