Billionaire investor Ray Dalio just put the hedge fund pain in perspective

Ray DalioHeidi Gutman / CNBCRay Dalio talks at the Alpha Exchange panel at the CNBC Institutional Investor Delivering Alpha conference September 13 in New York.

It’s not easy to be a hedge fund manager today.

One-time lucrative fees are going down for many, and the market environment is such that many managers are having trouble making money for their investors.

But Ray Dalio, founder of the world’s biggest hedge fund, thinks he’d be able to launch a fund today, despite industry headwinds.

“I think that the market environment will always be exciting,” Dalio said at the Delivering Alpha conference in New York hosted by CNBC and Institutional Investor. “And the question is whether you’re adding value or not. I think, most importantly, whether you’re going to add value in a bad time.”

Dalio’s firm is one of the most successful of all time and has raked in assets even as performance has lagged this year. The Westport, Conn. firm manages around $150 billion.

“So I think that it depends how you play the game,” he said. “And there will be opportunities. And the important thing is whether you also make money in the good times and the bad times.”

When host Andrew Ross Sorkin asked Dalio asked if Dalio could launch Bridgewater today, he said:
“Oh, yeah.”

Bridgewater, to an extent, is an outlier. Many hedge funds are facing pressures to lower their fees, which are traditionally two per cent of assets and 20 per cent of performance.

Funds that are returning in the single digits struggle to charge high fees, Ross Margolies, the founder of Stelliam Investment Management, said on a separate panel at the conference.

Investors are questioning why they are paying high fees when the average hedge fund has underperformed the S&P 500 index for the past eight years.

Still, for those that hit it out of the park, investors are lining up.

“There has been constant fee pressure but also extraordinary people who can charge 3 and 30, and you’re happy to pay, if that’s what the manager is going to deliver,” said Mary Erdoes, CEO of JP Morgan Asset Management.

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