Louis Bacon’s plans to step back from trading haven’t panned out, and the legendary manager is instead making money in the market meltdown.
The macro hedge fund manager, who told investors in November he’d be stepping back at Moore Capital Management, has been warning his portfolio managers to be cautious about the potential market fallout of the virus since January, according to people with knowledge of the matter. Moore’s main fund is up by double digits in 2020 after gaining 5% in the first two months of the year and rallying further in March.
Bacon, 63, returned investor capital from his three main macro funds at the end of last year and consolidated them into a fund that manages partners’ money. He said the firm he founded would operate with less participation from him, but hedged by telling clients, “time will tell how eagerly I pry myself away from daily markets.”
Indeed, Bacon is still trading part of the portfolio, said the people, who asked not to be identified because the information isn’t public. He’s also told his fellow managers at the firm since late January that his market outlook on the Covid-19 virus was pessimistic.
Meanwhile, Moore is adding staff. The New York-based firm, which oversaw $8.9 billion as of the end of 2018, hired Chris Nicoll and a team of five portfolio managers from Stone Milliner Asset Management. They started on March 1, said one of the people. The firm is seeking to hire additional equity-focused money managers.
Macro trader and billionaire Paul Tudor Jones is among those sharing Bacon’s sentiment. He was one of the first investors to sound the alarm about the virus, in an interview on Jan. 21 from Davos, Switzerland.
“We’ve got a curve ball with this coronavirus, I think it’s a big deal,” he told CNBC. “From a trading standpoint, there’s zero way I’d want to be long until — we really need about two weeks to see what type of spread we get.”
Even so, Tudor Investment Corp.’s flagship BVI fund only rose about 1% in February, when news of the virus spreading began to rattle global markets, according to an investor document seen by Bloomberg. The gain brought BVI’s return for the first two months of the year to 1.5%.
Other macro funds may have benefited from the market panic simply by being at the right place at the right time. Investors say the funds generally started the year being long on bonds and short on oil, bets that have paid off as expectations have grown that the virus will hurt the global economy and prices for North American crude plunged to their lowest since 2016.
Brevan Howard Asset Management’s flagship hedge fund rose 6.8% last week, boosting the $3.2 billion macro fund’s returns this year to nearly 11%, Bloomberg reported. Andrew Law’s Caxton Associates jumped 6.4% in the first week of March, bringing gains for the fund to 12% for this year, according to an investor document.
The Financial Times reported those gains were due to the bond rally, and that Law has since removed most of those bets.
“With rates so low, these positions in fixed income have run their course,” Law told the newspaper in an interview. “I don’t believe we’ll see negative short rates in the U.S. They’d regard that as anti-capitalist and deeply corrosive.”
Representatives for Moore and Tudor declined to comment. A representative for Caxton didn’t return an email seeking comment.
— With assistance by Saijel Kishan
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