| Raymond Dalio, Bridgewater Associates (Bloomberg) |
When Bridgewater Associates announced a shake-up of its management team on Thursday, it separately published a two-page missive criticizing the press. In an unsigned letter, entitled “Our Challenges with the Media,” the world’s largest hedge fund firm laments being in the “awkward position of having some in the media mischaracterize” what it is doing and thinking, adding, “rather than let these mischaracterizations stand, we want to clarify our thinking.”
The letter explains that Bridgewater has traditionally tried to remain under the radar but has received more attention as the firm has grown. “Because we originally refused to deal with [the media] and because of their tendency to sensationalize, their pictures of Bridgewater were distorted,” the firm says in the letter. “We sought professional advice and were told that we could no longer stay below the radar and it was best for us to clarify inaccurate pictures and to try to be understood.”
The letter then goes on to say that this approach proved to be better than remaining quiet. Bridgewater found that “some distortions continued, though there were fewer of them than otherwise would have been.” The firm cites its succession plan, its corporate culture and its views on China as the issues most frequently distorted by the media. Notice Bridgewater uses the term “distortions” and not “inaccuracies.”
The letter is surprising on many levels. Unlike many of our political leaders, hedge fund managers rarely publicly lash out at the media. This is in part because some hedge fund managers are skilled at using the press to control their messaging.
Hedge fund managers and the press have had an uneasy relationship for decades. This dates back at least to the 1980s, when hedge fund managers were known for producing gargantuan returns compared with those of traditional managers. Hedge fund managers were obsessed with secrecy, which, thanks in part to their very light regulation, helped shape their mystique — and helped to justify the hefty fees they charged.
And while the industry has changed — the total number of hedge funds has proliferated and their growing ranks of institutional investors have accepted more modest returns — it’s still not uncommon for big-time managers to avoid talking to the media.
On the other hand, there are scores of managers who have chatted with the media behind the scenes for years. They just require reporters (myself included) to not attach their names to their comments. This way they can retain control of the message without looking like crass self-promoters.
A few dozen managers in recent years have been appearing on CNBC and other cable business networks and speaking at conferences, some more frequently than others. But remember, in these environments they are still controlling what they say and whom they say it to. It is embarrassingly rare when they are pressed in a television interview. Usually, there is little controversy, unless managers intentionally stir things up, as when Pershing Square Capital Management’s William Ackman made his more than three-hour case for shorting Herbalife.
Managers like Greenlight Capital’s David Einhorn have publicly presented cases for shorting individual stocks. But these talks are usually well-choreographed presentations with just a few questions from the audience.
In fact, Einhorn once refused to let his picture be taken to accompany a magazine feature, asserting that he wanted to maintain his privacy. But then, a couple of years later, he started appearing on TV, hawking his book and speaking at conferences.
So it’s rare for hedge fund managers to openly criticize the media. There are exceptions; they sometimes lambaste their investors for passing around their confidential quarterly letters to reporters. The dirty little secret is that some of the managers are the ones passing these letters around, while many others enjoy the publicity.
Occasionally, a manager will address his relationship with the media. Three years ago, for example, Baupost Group founder Seth Klarman, who rarely gives interviews or speaks at conferences, told clients in a year-end letter how he is determined to protect Baupost’s image and how the outside world perceives the firm.
“In contrast to the sometimes well-deserved poor reputations of Wall Street firms and investment businesses, we are proud of our firm’s values and actions that put clients first,” Klarman explained in the letter. “A licentious media and sometimes fact-free blogosphere nearly guarantee ongoing coverage of Baupost regardless of our best efforts to stay out of the headlines.” Klarman, of course, is still well-known and has a pristine reputation.
The fact that Bridgewater, a firm led by the powerful billionaire Raymond Dalio, is bashing the media is a little unnerving at a time when some of our presidential candidates have gone much further than Dalio. Donald Trump, the leading GOP contender, obsessively cites the Constitution for not altering the Second Amendment by one bullet but wants to tear apart the First Amendment. He recently promised to weaken libel laws so people can sue and win money if the media writes a negative story. Or does he really mean “distortions”?
Ted Cruz is shrewder. He doesn’t explicitly call for weakening the First Amendment. However, he doesn’t miss an opportunity to demonize, criticize, disparage or marginalize the so-called mainstream media. I presume anyone who writes a negative story about him is by definition the mainstream media.
What is all this about? As one person who deals with hedge fund managers on a daily basis recently put it: Hedge fund managers (and you can insert all billionaires such as Trump) control every single thing in their lives except the government and the media. And it kills them.
So now Trump is trying to become the most powerful government figure in the world and as one of his first acts, is planning — maybe even hoping — to control the media.
Yes, members of the media can be among the most thin-skinned people. They sometimes can’t take the same criticism they readily dish out. However, when people who value their privacy fire off essays on the media, it is worth examining the context of these comments.
