China, Pa. teachers, and a ‘cult-like’ culture: Why Dave McCormick’s time at Bridgewater, the world’s largest hedge fund, matters for his Senate run

Dave McCormick’s 13 years as a leader of the world’s largest hedge fund is an important résumé line for the Republican as he runs for the Senate.

But McCormick’s time at Connecticut-based Bridgewater Associates has also proven to be a fruitful source of lines of attack for Democratic incumbent Bob Casey, who is seeking a third term in Pennsylvania’s nationally watched Senate contest.

With $124 billion in assets under management, Bridgewater is not a typical hedge fund.

In addition to being massive, Bridgewater is known on Wall Street as a unique and sometimes-controversial firm that pioneered a research-based investment approach that helped predict the 2008 financial crisis. It also has an intense internal culture of “radical transparency” that has been called “cult-like.”

Almost everything that makes Bridgewater stand out from its peers stems from its eccentric founder, Ray Dalio. But McCormick, who held top leadership roles since joining the firm in 2009 and was CEO or co-CEO from 2017 to 2022, was a major player at Bridgewater before he left to run for office.

McCormick declined an interview request, but campaign spokesperson Elizabeth Gregory said in a statement that he was “proud to have led Bridgewater” and contrasted his record in the business world — at Bridgewater and the Pittsburgh-based software company FreeMarkets — with that of Casey, who served as Pennsylvania auditor general and treasurer before becoming a senator in 2007.

“Unlike weak career politician Bob Casey, who has spent his life collecting taxpayer-funded paychecks, Dave knows how to reduce inflation and create jobs,” Gregory said.

Here’s what you need to know Bridgewater and McCormick’s time with the firm:

Bridgewater is a hedge fund, which is a type of investment firm that gets paid heavy fees to manage money for clients, often with promises of market-beating returns and strategies that protect assets during downturns.

Hedge fund clients can vary widely, but they often include major institutional accounts, such as pension funds. Bridgewater, for instance, for years was a major money manager for the Pennsylvania School Employees’ Retirement System, or PSERS.

Dalio founded Bridgewater in 1975, and the firm is known as a “global macro” hedge fund, meaning it usually makes bets on macroeconomic trends, such as the rise and fall of various currencies, rather than on the performance of individual companies.

Using rigorous data analysis to make investment decisions is now standard practice for Wall Street investment houses, but that was not the case for many firms in the 1980s and 1990s. Dalio made a name for himself as someone who could see the bigger picture in the market and help his clients profit from his insights.

Already a major player, Bridgewater reached new levels of fame when Dalio reportedly predicted the mortgage industry collapse that led to the 2008 financial crisis and tried to warn President George W. Bush’s administration. Bridgewater was one of few firms positioned to profit from the recession.

This is around the time Dalio met McCormick, who was a high-ranking official in Bush’s Treasury Department as Dalio was pushing the administration to forcefully respond to the emerging crisis.

McCormick became Bridgewater’s president in 2009 and would come to be seen within the firm as part of Dalio’s inner circle.

Bridgewater is perhaps best-known for its internal culture of “radical transparency,” as Dalio has described it.

Employees are encouraged to openly question each other without regard to rank. Mistakes are picked apart in lengthy sessions. For years, meetings at the firm were recorded, and all employees could access the recordings. At one point, staffers got “baseball cards” that scored them on skills and character like a player’s statistics.

For Dalio, who has since stepped back from running the firm, that culture was crucial to Bridgewater’s success, a way to ensure decisions are made without regard to ego and emotion. For critics, Bridgewater had a cultish environment.

“That was perceived as part of the special sauce,” said Gregory Brown, a finance professor at the University of North Carolina. “It was essential really to be a participant in that it wasn’t really an optional thing. It was really expected that people would say what they thought.”

McCormick evidently thrived in that culture and reportedly called himself “the Ray whisperer,” according to The Firm, a 2023 book about Dalio by financial journalist Rob Copeland.

The McCormick campaign did not respond to questions about whether he planned to incorporate any of Dalio’s leadership methods into how he would make decisions or manage his Senate office if he is elected.

Bridgewater declined to comment for this story. But after The Firm was published, the company said the book provided a “false and misleading depiction” and that Bridgewater has a “unique philosophy” and is “a company whose overriding objective is excellence, achieved through constant improvement.”

In the early 2000s, PSERS, the retirement fund for Pennsylvania teachers, was on the forefront of a national trend that saw major pension funds put money into “alternative investments” that were supposed to outperform the stock market.

Bridgewater at one point managed almost $5 billion for PSERS, making it the largest money manager for the pension fund, and the Connecticut firm became a symbol of the rise and controversial fall of the state’s love affair with hedge funds.

PSERS paid Bridgewater almost $700 million in fees over over the years, The Inquirer has reported. Citing disappointing returns, the pension fund had voted to pull all of its money out of Bridgewater’s hedge fund products by 2022.

Former State Treasurer Joe Torsella sat on the PSERS board and was an outspoken critic of its reliance on hedge funds. The pension fund’s staff went on lavish trips with Bridgewater leaders, leading to a “capture of the thinking at PSERS,” the Democrat said in an interview.

“PSERS was unduly important to Bridgewater, and on the PSERS side there was way too much of an acolyte mentality to the gospel” of Bridgewater, Torsella said. “It was a very bad deal for Pennsylvania and a very good deal for Bridgewater.”

Gregory, the McCormick spokesperson, said Bridgewater “delivered billions of dollars in profits on behalf of the pensions of teachers, firefighters and police officers, including in Pennsylvania.”

It’s true that the state’s portfolio grew with Bridgewater, which counted PSERS as a client from 2004 to 2021. But the problem for state officials like Torsella was that the firm’s investment strategies often failed to outperform the market — and after fees, it was at times a net negative compared to what the state could have obtained with low-fee index funds.

Brown, the finance professor, said there was a “golden age” for hedge funds in the 1990s and early 2000s, when they generated profits exceeding market benchmarks by 3% to 5% per year.

That changed around the time of the global financial crisis, and hedge funds now appear to offer little or no advantage, Brown said. The reasons for the performance decline is a matter of active debate. But the trend is a vindication for longtime skeptics like Torsella.

“The fundamental premise of a hedge fund is: I’m just going to do different things that let me beat the market,” Torsella said. “In the end, it’s just destined to violate the free lunch principle, which is there isn’t one.”

Casey’s campaign has relentlessly criticized McCormick for Bridgewater’s investments in China — a strategy employed successfully by McCormick’s 2022 GOP primary opponent Mehmet Oz.

The line of attack isn’t surprising because Bridgewater isn’t just any major U.S. investor when it comes to China.

The firm opened a unit in Shanghai in 2016, a time when other U.S. investors were backing away from China, according to Reuters. And after years of relationship-building, Dalio helped the firm become the “first global alternative manager to be granted a domestic investment license” in China, according to Institutional Investor magazine.

McCormick began publicly separating himself from Bridgewater’s reputation for being a leading China cheerleader before he left the firm to run for office. In December 2021, McCormick objected to controversial comments Dalio had recently made about China in a company call that was leaked to Bloomberg. (Dalio in an interview had likened China’s banishing of some of its own citizens from the public eye to the actions of a “strict parent,” a comment he later walked back.)

In his 2023 book Superpower in Peril, McCormick wrote that about 2% of Bridgewater’s holdings were in China when he left and said that he had qualms with the firm’s role in the country.

“We struggled with this tension during my time at Bridgewater, when the firm built out its business in China,” McCormick wrote. “For years, I had butted heads with our founder, Ray Dalio, about our very divergent views on China’s direction and the threat it posed to America.”

Pennsylvania Democrats this year have attacked McCormick for his reported involvement in two instances in which women who left Bridgewater felt pressured to remain silent about incidents involving male colleagues.

Both episodes have surfaced due to the publication of Copeland’s book, and McCormick is not accused of inappropriate sexual conduct toward women in either instance.

In one case, a Bridgewater employee accused one of McCormick’s predecessors as CEO of touching her inappropriately. Nothing came of the allegations at the time, and the woman went on to found her own firm.

Years later she met with Dalio and McCormick at a diner, Copeland wrote. Dalio told her he heard journalists were looking into alleged misconduct at the firm, and during the exchange, McCormick said, ”Maybe the issue is that you aren’t being a supportive public presence for us,” Copeland wrote.

The other incident described by Copeland centered on a woman who left the firm and signed a nondisclosure agreement after management discovered she had a romantic relationship with a male coworker.

“Shortly before leaving, she also received an unexpected in-person visit from Bridgewater co-CEO David McCormick. He told her that if she ever broke the agreement, she would be in litigation for the rest of her life,” Copeland wrote.

McCormick’s campaign declined to comment on the incidents but sent a statement from Memi Kirikoglu, who was McCormick’s chief of staff at Bridgewater, and said he “operates with the highest levels of integrity.”

“Throughout my time working alongside Dave at Bridgewater, I found him to be an incredible force for good,” Kirikoglu said. “Dave continues to be a champion of mine, and I know I’m one of many women who felt supported by him.”

Staff writer Julia Terruso contributed material.