Less than a year after retiring, Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund, is threatening his former colleagues with the one thing they have worked hard to prevent: his return.

Under the terms of his retirement contract, Mr. Dalio, who left the firm full time in October, has the option to retake control of Bridgewater if its financial performance flags, according to five people with knowledge of the agreement.

The billionaire investor, who is 74, doesn’t necessarily want to come back to run the firm he founded 50 years ago. Instead, he has repeatedly brought up the idea of starting a new fund within Bridgewater that he hopes would help improve the firm’s investment returns, four of the people said. Bridgewater’s main fund has been on a downward slide since Mr. Dalio’s retirement.

Some of Bridgewater’s top staff and board members, including its chief executive, Nir Bar Dea, whom Mr. Dalio appointed, have repeatedly told him that they will quit if he interferes. They fear that Mr. Dalio might use the proposed fund as a way to come back and reassert control, according to people briefed on internal deliberations but not authorized to speak publicly.

Mr. Bar Dea has told colleagues that he feels he has two jobs: to manage Bridgewater and to manage Mr. Dalio, according to two people with knowledge of those conversations.

In a statement, Mr. Dalio said he had no intention of returning “to run” Bridgewater. Asked about tension at the firm, he said: “We have fought about many things all the while still loving each other — like an Italian family.” He declined to address the proposed fund.

Alan Fleischmann, a spokesman for Bridgewater, said the firm was “thankful for all that Ray has contributed and continues to contribute, as our founder, mentor and as a productive board member — hopefully for many years to come.” Mr. Bar Dea declined to be interviewed.

Several current and former employees said the fragile state inside the firm reminded them of one of Mr. Dalio’s favored phrases, which he deployed in myriad meetings and other internal conversations in the run-up to his retirement.

“Take me out,” he told Bridgewater executives at the time, according to people present at the meetings and documents reviewed by The New York Times, “and get what you deserve,” a threat that implied the firm would fall apart without him.

The internal strife has become an unwelcome distraction at a firm that manages $125 billion for pension funds, sovereign wealth funds and other sizable investors from around the world, including China and Australia — many of whom Mr. Dalio personally wooed.

This account of friction between the firm and its founder is based on interviews with 10 current and former Bridgewater employees and advisers, who sought anonymity to speak freely about the fissures.

This year, Mr. Dalio raised the idea of the new fund with Mr. Bar Dea, who shared it with Bridgewater’s board. Mr. Dalio, who remains a director, was the only one to speak in favor of his own idea, according to three people with knowledge of the discussion. The board swiftly dropped it. Mr. Dalio declined to comment on the board discussions or on his suggestions to Mr. Bar Dea since October.

If Mr. Dalio gets his way, he will essentially be competing with those to whom he ceded control, giving the firm’s investors a choice between backing the Bridgewater founder’s ideas or those of his successors.

Bridgewater, which Mr. Dalio started in his two-bedroom apartment, is a so-called macro investor, meaning it tries to predict global economic moves. In the last three months of 2022, the company’s main fund, Pure Alpha, shed around two-thirds of its annual gain. It also lost money in the first half of 2023, people with knowledge of the performance said, despite a bumper period for stocks. Bridgewater’s assets under management have fallen to around 25 percent below their peak, according to filings.

Mr. Dalio is well known for his confrontational management approach, called “Principles,” that was made famous in his best-selling autobiography of the same name. In accordance with that style, which he calls radical transparency, Mr. Dalio has a history of upbraiding employees at Bridgewater through taped trials and case studies, as well as rating junior and senior staff members with a complicated performance metrics system.

He even made headlines this spring for clashing with a neighbor over a rooftop addition to his family’s loft in New York’s SoHo neighborhood.

Mr. Bar Dea, 42, is less well known. A former major in the Israeli military, he joined Bridgewater in 2015 and rose through its managerial ranks, helping run the firm’s operations, which are separate from the firm’s core business — what it calls its “investing engine.” He made allies, however, with some of Mr. Dalio’s longtime deputies, including Bob Prince and Greg Jensen, both of whom held the title of co-chief investment officer alongside Mr. Dalio. Mr. Prince and Mr. Jensen are also billionaires thanks to their decades-long tenures at the hedge fund.

While Mr. Dalio was still in charge, the three men, in myriad conversations relayed to others who were not authorized to repeat them publicly, shared an increasingly pessimistic view of his investment acumen. Bridgewater was flat in 2019 — a banner year for stocks overall — and plunged further at the start of the pandemic, having kept its bets unchanged.

Roughly three years ago, the three men presented Mr. Dalio with an incentive to exit, according to people with knowledge of the negotiations. If he agreed to surrender his titles of co-chief investment officer and chief executive of Bridgewater, Mr. Prince and Mr. Jensen would take on additional personal debt to buy out Mr. Dalio’s majority ownership stake.

Mr. Prince took on a particularly heavy load, eventually agreeing to pay Mr. Dalio enough for Mr. Prince to become the largest owner of Bridgewater, partly in exchange for Mr. Dalio’s ceding his formal investment roles at the firm in favor of a new investment committee in which his power would be diluted, the people said.

When the firm produced impressive investment gains for a two-year stretch beginning in mid-2020, the hedge fund told investors that it was because of that new investment committee, in which Mr. Dalio had no day-to-day role.

Mr. Fleischmann, the Bridgewater spokesman, said that in the three years since the creation of that new committee, Bridgewater’s flagship fund had produced an average annual return of 10 percent, after fees.

Investment performance hasn’t been the only issue between Mr. Dalio and his successors. At one point during the long back-and-forth over his retirement package, he asked his former firm to pay millions of dollars to license software that he helped design that rates employees in an array of personality categories that Mr. Dalio himself helped design, four people briefed on the request said.

Mr. Bar Dea beat back the request, calling it unjustified, given that few, if any, other companies had adopted the software. Mr. Bar Dea considered not giving Mr. Dalio an office after his retirement, though the founder eventually received one.

The bigger price was to negotiate Mr. Dalio’s exit. The veteran investor, worth an estimated $19 billion, asked for billions of dollars more in payments to pare back his ownership stake. Bridgewater agreed to pay Mr. Dalio recurring annual payments of $1 billion under an exit package, The Times previously reported.

Even after Mr. Dalio and his successors agreed on that price, people involved in the negotiations said, they still weren’t certain Mr. Dalio would sign until that October morning when he finally did.

Maureen Farrell contributed reporting.

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