Multi-strategy hedge funds have been around for more than three decades. Will they make it to a half century? Ray Dalio, founder of 50-year-old hedge fund Bridgewater Associates has his doubts about this thriving subsector of asset management. The question is whether the flaw he sees in the “multi-strat” model is in fact a feature not a bug.
Dalio created Bridgewater in his apartment and turned it into an institution that had $92 billion under management at the end of 2024. It’s endured despite him leaving both the management team and shareholder register.
Bridgewater may be a macro hedge fund rather than a multi-strat or “pod shop” running the whole cookbook of investment styles. But Dalio knows how to create a lasting organization. Hedge funds rarely achieve that.
The entrepreneur’s original goal was to create meaningful work, meaningful relationships and a transparent environment, he told this week’s Bloomberg Odd Lots podcast. “So… what do you think about multi-strats?” ventured host Tracy Alloway, noting that they’re predicated on multiple small, independent teams doing their own thing.
Dalio’s response: That model is effective in making investment decisions but maybe less so in creating meaningful staff ties. Without the glue of community, people may leave for a “bit more money.” They’re “not in it together.” That threatens continuity, an obstacle to growing a lasting enterprise.
Then there’s artificial intelligence. Dalio offered a vision of independent investment managers one day plugging into some kind of AI platform rather like Uber drivers. While he played his cards close to his chest, the implicit theme is the same: The less a business is grounded in human relationships, the greater its vulnerability to disruption. If there’s no community, who needs an organization? Hence Dalio’s warning: “I think it’s not going to last.”
The insights will find backing among those enlightened social scientists who recognize that humans aren’t just economic animals and have many goals in life, some of which they’ll pursue through work. Likewise, a firm with a culture of cooperation and information sharing can develop know-how that rivals cannot easily replicate. That’s a form of competitive advantage.
Dalio is, of course, talking about what makes humans tick, but this visceral approach also fits with the more utilitarian arguments made by bank bosses for getting people back to the office. All leaders should heed the central ideas: A sense of belonging retains talent; retention fosters institutional memory; a sense of mission can motivate employees to promote the organization’s aims.
And yet, the multi-strats must be doing something right to have come this far.
Millennium Management, the original pod shop founded in 1989, has just convinced investors to pay roughly $2 billion for a 15% stake. Multi-strat Citadel was founded a year later. Perhaps there’s more social cohesion at work here than meets the eye, or “community” isn’t necessary to succeed in this area.
