How does the world’s largest hedge fund really make its money?

“What was he even talking about?” he vented afterwards.

Financial analyst Jim Grant, the self-proclaimed “prophet of reason,” watched the interview with amazement. He had a mysterious newsletter, Grant’s Interest Rate Observer, which was popular in the sense that many serious investors claimed to read it.

Mr. Grant had been quietly thinking about Bridgewater for years. He instructed his top deputy to look into it. They spread far and wide, studying the company’s public files and secretly talking to anyone who had any idea what was going on. They were flooded with “all kinds of people winking and nodding,” Mr. Grant recalled, “that something was really, really wrong.” In October 2017, Mr Grant devoted an entire issue of his publication solely to Bridgewater and the themes of ‘distraction, sycophancy’ and ‘mystery’.

The newsletter claimed a litany of problems. Shareholders of Bridgewater’s parent company — a group that includes employees and customers — did not automatically receive copies of the company’s financial statements. Five separate Dalio family trusts each appeared to own “at least 25 percent but less than 50 percent of Bridgewater, something that seems mathematically difficult,” the newsletter said. According to public disclosures, the hedge fund lent money to its own accountant, which struck the veteran analyst as precarious and unusual. “We’re going out, Bridgewater is not for all ages,” the newsletter concluded.

At 8:30 p.m. on the day the report was published, Mr. Grant sat down on the couch at home with his wife to watch a New York Yankees game. When his home phone rang from an unknown number in Connecticut, Mr. Grant had the call forwarded to voicemail. It wasn’t until about half an hour later that his wife heard a distant beep. She walked over, pressed play on the machine, and put the message on speaker. Mr. Dalio’s voice was measured and calm:

“I’m not sure if you’ve seen the current issue of Grant’s,” Mr. Dalio said, according to Mr. Grant. Mr. Dalio’s message lasted almost half an hour, during which he detailed his complaints about the piece.