Louis Bacon plans to give back $2 billion, or 25 % of his main hedge fund Moore Capital Management
Louis Bacon’s macro hedge fund Moore Capital changes in interest rates and currencies, returned a “disappointing” 0.35 percent in the first half and a “tolerable” 6 percent in the past year, according to letter sent today to clients. He has gained more than 18 percent a year since starting the Moore Global Investments fund in 1989. “Unfortunately, as the amount and percentage of the assets I manage have increased these last several years, the markets have been trickier and less liquid,” Louis Bacon wrote in his eight-page letter. “The ‘risk on/risk off’ environment appears to be an abiding presence that has kept my market engagement low.”
Louis Bacon is not only macro hedge fund manager struggling to make money this year. Ray Dalio’s Bridgewater Associates LP lost 2 percent in its $54 billion Pure Alpha II fund this year through July 20, according to investors. Alan Howard, who runs Brevan Howard Asset Management LLP, lost 1.3 percent in his $26 billion Master Fund in the same period, clients said.
Louis Bacon’s Moore Capital Management LLC oversees a combined $15 billion in all its six funds. The hedge fund manager previously returned about $2 billion over the life of the macro fund, he said in the letter. Every time he gave money back, performance improved.
Assets fell from $9 billion at the start of 2000 to $5.1 billion as of the beginning of December, after investors pulled $2 billion following losses and Bacon returned $400 million. That month, Bacon made 11 percent, ensuring that the fund posted a positive return for the year. At the time, Bacon said the smaller asset base “gave us a more flexible trading attitude.”
Bacon’s hedge fund returned $1 billion in 1999, after which the funds gained almost 20 percent in two months.
In 1994, the firm’s assets shrank by 70 percent after a 14 percent loss, client redemptions and the return of some capital. In the subsequent five years, the funds returned 280 percent.
Moore Capital will cap each client’s investment in the fund to 5 percent. The fund has already told some investors they will be redeemed in full as part of this capital return.
Investors wanting to keep their money with Moore can invest in the $4 billion Moore Macro Managers fund, which is run by 14 portfolio managers. That hedge fund, which has limited new investments, has outperformed Bacon’s hedge fund over the last five years, with a cumulative return of 37 percent, or 6.5 percent a year, on average, compared with 28.6 percent, or 5.2 percent, for Bacon’s hedge fund. Through July, Bacon has returned 1.6 percent this year and the Macro Managers fund has climbed 1.8 percent.
Louis Bacon said that fund doesn’t face the same capacity constraints as each manager trades a smaller amount of money and some trade in a broader number of markets.
Other hedge funds like Brevan Howard returned $2 billion to investors in its biggest fund after it told clients it would limit the fund’s size to about $25 billion to ensure it continued to produce top returns.
Paul Tudor Jones has limited investments in his $9 billion Tudor BVI Global fund since 2010, and recently opened a multimanager macro fund to give some of the most experienced portfolio managers at this Greenwich, Connecticut-based firm the ability to manage more money.
Read More: Bloomberg