By Nathan Vardi

‘2023 will likely be the year of a very significant global recession’: Greg Jensen has positioned the world’s biggest hedge fund for more market mayhem ahead. He lands on the MarketWatch 50.

On the first Sunday night of October, Greg Jensen hosted Ray Dalio at his New York City apartment to toast the biggest transfer of power in the history of the $4 trillion hedge fund industry. Over a meal of halibut and grilled cabbage, Jensen, Dalio, and their two wives, marveled in their relationship and the transition atop the world’s biggest hedge fund firm that had just taken place.

Starting in a much more modest two-bedroom New York City apartment 47 years earlier, Dalio had built Bridgewater Associates into a $150 billion colossus, and for a long time it was unclear whether he would actually ever hand over the business he created. The rollercoaster transition process dragged on for 12 years, with fits and starts that included Jensen’s own demotion. The vast majority of hedge fund firms don’t outlast their founders.

Even as recently as Valentine’s Day 2022, the issue remained in doubt. Jensen had become frustrated working out the final details of how Dalio would relinquish control and ownership of Bridgewater, with tough sticking points over the sharing of future economics remaining. Jensen was scheduled to be married in Anguilla six days later and was determined not to have the tense talks going on over Zoom destroy his wedding. During a pause in the negotiations, Dalio turned to Jensen and told him how much he was looking forward to joining Jensen at his wedding, shocking some of those on the call who were locked in battle over various points.

“It was a good moment. You could be battling here but the big things — one of the great things about Ray is he is always there for the big things,” Jensen said in an interview with MarketWatch. “You have disagreements, you work together, you stay together and you make it to the other side.”

Greg Jensen is having an astonishing year. With stocks and bonds crashing, Jensen has helped navigate Bridgewater toward an incredible 2022, nailing inflation and the upheaval it has caused. Bridgewater’s flagship hedge fund was up 34.6% in the first nine months of the year as the US stock market fell by nearly 20%. At 48, Jensen is now one of two co-chief investment officers at Bridgewater, together with Robert Prince, who is 63, and Jensen is poised to lead Bridgewater’s trading strategies for years to come. In addition to also getting married in 2022, Jensen even won a coveted World Series of Poker bracelet at this year’s fabled event in Las Vegas.

Jensen co-runs a team that plays in every market imaginable — stocks, bonds, currencies and commodities — and is a regular contributor to Bridgwater’s Daily Observations newsletter, closely read by large institutional investors and policymakers. He is now on the MarketWatch 50 list of the most influential people in markets.

“He’s 25 years and a day younger than me, so I figure he’s got 25 years and a day ahead of him,” said Dalio in an interview with MarketWatch, in which he expressed deep affection for Jensen. Dalio pointed to Jensen’s ability to work with teams to drive fundamental market research and convert it into trading algorithms, describing Jensen as a key part of his professional family that will move Bridgewater forward. Said Dalio: “You don’t want to stand in their way.”

The only thing stopping 2022 from being perfect for Jensen is the poor performance of Bridgewater’s passive All Weather strategy, but Jensen is confident that will turn around. More than a year ago, he was publicly pounding the table about inflation and a warning that “the world is bad for investors going forward.” By the summer of 2021, Jensen, Prince and their team had dissected the causes of rising prices and concluded they were not all coming from the supply side of the equation — then the underpinning of the view held by Federal Reserve policymakers that supply shortages related to COVID-19 were creating inflation. Instead, they separated how much of it was being caused by the increase in demand and determined the economy was in a demand-driven inflation boom, fueled by checks written by the government that sparked consumers to buy goods and services without the corresponding boost in supply because many of those consumers were not producing anything more.

“Markets missed it totally,” said Jensen. “The Fed missed it, and in a sense the markets believed the Fed.”

Now, Jensen is preparing for a deep and long economic recession that he believes will hit corporate profits and stocks harder than the markets expect, presenting monetary policymakers in the US and across the world with difficult decisions ahead. He doesn’t anticipate stocks bottoming out for at least another six months.

“We are expecting a much bigger recession than the markets are expecting,” said Jensen, adding stocks are likely to drop at least another 20%. “You might go way past that, but I think it would be about another 20% to get to equilibrium levels given where real interest rates are and where growth in earnings are likely to net out.”

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Greg Jensen moved around a lot as a kid. He didn’t like it. Born in Queens, Jensen cycled through places like Long Island and Toronto, before landing in the upstate New York town of Niskayuna. Jensen’s father worked for Irving Trust Bank until he left after a corporate merger and ended up working at an environmental data company.

A bit socially awkward, Jensen loved sports, but he did not excel on the playing field. Instead, he gravitated toward games that combine math and probabilities, like poker and Stat-O-Matic Baseball, in which player cards and dice are used to simulate ball games. After several months in a new town, he would find friends who shared his interests.

At Dartmouth College, Jensen studied math and economics, and became president of his fraternity. A former fraternity member who graduated years earlier had started working for an obscure hedge fund firm then based in Wilton, Ct., and decided he wanted to recruit someone from his old stomping grounds. As a result, Jensen ended up with an internship at Bridgewater Associates. Once he got there, Jensen knew he had found his people.

Ray Dalio had founded Bridgewater as a research and consulting organization with a Daily Observations newsletter that developed a strong following. Dalio pivoted toward money management after the World Bank gave him a $5 million account in 1985, focusing on macro investing and betting on large economic themes that cut across fiscal and monetary policies of governments. Ten years later, in 1995, when Jensen showed up to intern on Bridgewater’s trading floor, the place was still a small shop with 45 employees. To some, Dalio’s ideas about cultivating a workplace with brutal honesty and meritocracy could seem harsh, but Jensen loved the culture Dalio was building with Prince and found it cool to try to understand how currency or bond markets worked and translate those insights into trading algorithms.

“Even as an intern, Ray and Bob would listen to my ideas and think about whether I was right or not,” recalls Jensen. “I thought this is the mix. To take a place that cares about something interesting, that’s trying to have a discipline about it, and is really open to different points of view.”

Jensen returned after college and rode shotgun on the spectacular Bridgewater rocket ship. He focused on currency research, then ran the whole research department, and within a decade became a co-chief investment officer. He soon added the co-CEO title. These were go-go days at Bridgewater. The firm deftly navigated the internet bust as its main hedge fund scored big returns between 2001 and 2004. At the time, Dalio made the decision to go big and transform Bridgewater into as large an operation as he could make it. The firm was perfectly positioned for the 2008 financial crisis, when Bridgewater’s main hedge fund returned 9.5% while the markets crashed. Bridgewater also had successful years coming out of the crisis in 2011 and 2012. Investor cash flooded in and Bridgewater became the biggest hedge fund firm on the planet.

“We had three partners. There was a trio of three chief investment officers who each thought differently in their own way and could work great as a trio,” Dalio said of himself, Jensen and Prince. “We all brought different strengths and weaknesses … No one person can do it alone and any firm that is dependent on one person doing it is in trouble.”

Still, becoming co-chief of the world’s biggest hedge fund firm by age 36 left Jensen feeling like he could do no wrong. As Dalio kept heaping new responsibilities on him, Jensen, by his own admission, became a little arrogant. Jensen struggled to draw people into his initiatives and started to “believe my own bullshit,” he said. Over time, he also became impatient that Dalio was not transferring control of Bridgewater to Jensen and others fast enough, as had been planned, without recognizing that he himself was not doing enough to make such a transition work, Jensen said. In 2016, Jensen was stripped of his co-O title and went back to concentrating on Bridgewater’s investment activities as co-CIO, together with Dalio and Prince. For Jensen, it was a painful period of self-reflection and failure that taught him valuable lessons. He now views the experience as crucially important.

“Watching myself and, to some extent Ray, fail together on those moves and build from there,” Jensen said. “I wasn’t doing the things necessary to get us there.”

For his part, Dalio said he put Jensen in a difficult position. Dalio himself had tried simultaneously being a CEO and investment chief, juggling client meetings and managing day-to-day operations of a big company, while also being responsible for investment functions. “It’s too much,” said Dalio, adding he found handling all these overwhelming tasks.

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11-05-22 0951ET

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