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Ray Dalio on Reality and the Holy Grail: 15-Uncorrelated Return Streams

Ray Dalio on Reality and the Holy Grail

Ray Dalio is the hedge fund industry's E.F. Hutton – when he talks, people definitely listen....

Dalio, who runs the largest hedge fund in the world with over $120 billion in assets under management, started off by talking about what makes him successful when asked by Bloomberg's Eric Schatzker. 

"Understanding what reality is and how reality works; reality works in a certain way," Dalio said. "Given that reality works that way, what is my principle for dealing with reality ... a principle means how to deal with reality to get the result you want."

Dalio then outlined one of his company's "principles" - that gained notoriety in a recent New Yorker magazine profile about his hedge fund - which he called "the Holy Grail," and has guided him as a macro investor through the years.

"If you have 15 or more good, uncorrelated return streams, the math of that is such that if you go from one to two uncorrelated streams, you would reduce your risk by 80 percent," Dalio said.

Dalio also weighed in on the European debt crisis, saying there is "no surprise" what is happening now overseas, and was beaming about the Federal Reserve.

"If the markets are going to rally, and things are going to be good, it is going to be the Fed that will come in to save us," Dalio said.