Louis Bacon, the founder of Moore Capital Management, is returning client money from three flagship funds as another major macro firm succumbs after years of poor returns and investor redemptions.
The funds will continue running partners’ money and Bacon, 63, will reduce his involvement in trading, according to a letter to investors seen by Bloomberg. The firm will launch some individual funds managed by its best-performing managers that will remain part of Moore Capital.
“It will allow me the space to step away for significant periods of time when my other interests abound without the ongoing weight and responsibility of looking after public investors’ capital on a continual basis” Bacon wrote in the letter. “Moore’s strong trading platform with our current roster of portfolio managers will do well on its own.”
Bacon founded Moore Capital in 1989, and in the following decade became one of the biggest macro traders, producing an annualized return of roughly 30%. Like other macro funds, Bacon has stumbled since the financial crisis, halving that record.
The mediocre returns have meant a struggle for the industry to justify its relatively high fees. Moore Capital, along with other macro funds like Tudor Investment that trade everything from the euro to oil, have failed to beat the broader market in recent years amid soaring stock valuations and ultra-low interest rates. Clients have pulled $77 billion from hedge funds this year, twice as much as in all of 2018, according to data compiled by eVestment.
Bacon lost 0.1% in his Macro Global Investment fund this year through October, while the Moore Macro Managers fund — which is run by a group that doesn’t include Bacon — gained about 2%, according to an investor document seen by Bloomberg. All three funds that are returning client money, which also includes Remington Investment Strategies, have returned “low single digits year to date,” Bacon wrote.
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By slashing fees, custodians are also eliminating special ETF platforms they had spent the past five years building out.
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The move follows similar offers from other major brokerages in the last two weeks, as firms race to woo clients with the lowest-priced products possible.
October 21 -
In a little-noticed rule change, mutual funds no longer disclose their shrinking BD commission load-sharing payments.
October 16
“Disappointing results of these funds of the last few years obviously inform this decision but our long term record is one we remain proud of,” Bacon wrote.
Bacon said in the letter that stepping back would allow him to spend more time with family, on his philanthropic pursuits and to develop a number of “sports oriented” properties. The move will let Moore Capital be “more opportunistic” and “more competitive” in hiring and paying managers, he wrote.
Bacon joins fellow macro traders who have returned client capital to either run a trading firm with their employees or turn into a family office. In 2010, Stan Druckenmiller stepped back from managing other peoples’ money after three decades running Duquesne Capital Management. Michael Platt turned his BlueCrest Capital Management into a trading firm in 2015.
Other marquee firms that have shut funds or returned investor capital in recent years include Jon Jacobson’s Highfield Capital Management, Eric Mindich’s Eton Park Capital Management, John Griffin’s Blue Ridge Capital, Neil Chriss’s Hutchin Hill Capital and Richard Perry’s namesake shop.
Those that shorted the market suffered “steep losses,” while market-neutral products posted “modest gains.”
Bacon had told investors at the end of 2016 that he was “exceedingly upbeat” for the first time in several years about the “game-changing trading opportunities that lie ahead.” He pointed to President Trump’s victory in the U.S. election and the prospects for higher interest rates, a stronger dollar, booming corporate sector and improving market liquidity.
That didn’t pan out. Moore Capital continued to shed assets, and its main funds haven’t returned more than 6% a year since 2013.
“We have closed down a number of funds before in our 34 years of managing client assets so this wrapping up of client investment programs is not new ground for us,” Bacon said in the letter. “We expect the large majority of the invested capital to be returned early in the first quarter of the coming year.”
Bloomberg News
