Bridgewater, which fought the panel’s decision that it must pay the Tekmerion founders’ legal fees, has since settled the case.
Extreme Approach
The litigation highlights what some said is the firm’s extreme approach to departing staff. Among the measures: two years unpaid gardening leave for anyone who exits -- including those who were fired -- during which an employee must ask permission before taking a new job. There are also trade secret agreements for senior investment officials.
The contracts can be so strict that if enforced they could prevent an employee from, for example, trading equities or foreign exchange for the rest of their careers. About a fourth of the 200 people who work directly in investing at Bridgewater would find it very hard or impossible to take another job in finance, according to estimates from former employees, though a person close to the firm said that number was too high.
Bridgewater said in response to questions that its goals are to protect its intellectual property and to support employees in their careers after they leave.
“We won’t sacrifice the first goal for the second, but we work very hard to meet both goals,” it said in a statement. “We believe we are fair and reasonable partners and have no incentive to enforce the restrictions more broadly than necessary.”
Still, the buzz around the Tekmerion case caused the firm to hold an open forum where staff could discuss the issue.
This year’s changes to the models could eventually pay off -- Bridgewater has famously thrived after downturns despite struggling at first. While it lost 20% during 2008’s financial crisis, it gained 45% and 25% in 2010 and 2011, respectively. And after losing 22% in the dot-com crash of 2000, it posted three straight years of returns over 20% from 2002.
A similar bounce back this time could come too late for some investors who may have already lost faith in Dalio. Since stepping back from CEO duties, his public persona has been shaped by his book, celebrity friends including Sean Combs and even attendance at last year’s Burning Man festival.
“I’ve been in the business for 30-plus years and seen a lot of hedge fund founders become billionaires and focus on other things besides their firms,” said Brad Alford, who ran hedge fund investments at Emory University and the Duke Endowment. “And I’ve seen firms where assets have exploded, and that growth brings really bad performance.”
--With assistance from Melissa Karsh.
This article was provided by Bloomberg News.