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Wednesday, May 08, 2024

A legendary trader who made billions betting on wars, other macro events is hanging it up

A legendary trader who made billions betting on wars, other macro events is hanging it up

Longtime trader and hedge fund manager Louis Bacon is planning to return capital to investors after 30 years of investment. Bacon, who founded Moore Capital in 1989 with a $25,000 inheritance from his mother, is considered one of the most successful traders of his era. He rose to Wall Street fame making bets on everything from U.S. equity to European bonds and Asian currencies based on global events.
Longtime trader and hedge fund manager Louis Bacon is planning to return capital to investors after 30 years of investment.

The step to privatize Moore Capital will mark the end of a storied era at the firm and follows years of weaker performance at the fund.

“The time is propitious to take a step I have eyed for some time and ‘privatize’ our three multi manager flag ship funds — that is to say returning client assets,” Bacon wrote in a letter to clients viewed by CNBC.

“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,” he continued. “Intense competition for trading talent coupled with client pressure on fees has led to a challenging business model for multi manager funds such as ours.”

Moore has delivered a net annualized return of 17.6% and a cumulative return of over 21,000% since inception for its flagship Remington funds but has returned low-single-digit gains this year, the manager noted.

Bacon, who founded Moore in 1989 with a $25,000 inheritance from his mother, is considered one of the most successful traders of his era. Bacon popularized trading on a “macro” basis, making bets on everything from U.S. equity to European bonds and Asian currencies based on what he expected from the global macroeconomy.

In Moore’s first full year, his wager that Saddam Hussein would invade Kuwait generated an 86% return, according to a letter Bacon wrote to document his firm’s first 20 years. The letter also said that 13 years later, Bacon’s accurate predictions on the market events surrounding the Iraq war would buoy fund returns 35%.

His fund also successfully bet against Japanese markets in the early 1990s and at one point managed more than $10 billion.

The most recent decade, however, proved tougher for Bacon, who scrambled to match his historical returns thanks to persistently low interest rates. A Moore fund managed by Bacon reportedly declined almost 6% in 2018 amid two spikes in market volatility; another company fund overseen by other managers fell 3.3%, according to the Financial Times, which first reported Moore’s impending closure.

“Challenging trading conditions and muted returns for our macro multimanager funds of late masks a vibrant success at Moore in our Long/Short Equity platform, our Private Equity and Venture group, our Real Estate and our Speciality Lending businesses,” Bacon wrote in the letter to investors.

But he isn’t the only fund manager who has struggled in recent years.

Billionaire Leon Cooperman announced the closure of his Omega Advisors in summer 2018, telling clients that he doesn’t “want to spend the rest of my life chasing the S&P 500.”

Fellow billionaire Jeffrey Vinik, who made a name for himself running Fidelity’s Magellan fund, told CNBC last month that he was closing his hedge fund less than one year since its relaunch.

“It has been much harder to raise money over the last several months than I anticipated,” Vinik said in a letter dated Wednesday to investors.

“The climate for raising long-short equity hedge fund assets has been far more difficult than I expected, and performance of the VAM funds, while good ... has not provided the necessary momentum to bring in our desired level of investments.”
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