Louis Bacon Steps Back to End Decades Running Client Money
Bacon founded Moore Capital in 1989, and in the following decade became one of the biggest macro traders.
(Bloomberg) -- Billionaire Louis Bacon is effectively quitting the hedge-fund business after several years of poor performance, bringing an end to his three-decade run near the pinnacle of global finance.
Bacon, 63, will return outside investors’ money in its three main Moore Capital Management funds and step back from trading, he said Thursday in a letter to clients. The move caps a storied career that has traced the arc of modern finance, from the swashbuckling money managers who made fortunes in the 1980s and ‘90s to today’s era of computer-dominated trading.
“Louis Bacon will go down as one of the giants of our industry,” said legendary trader Stan Druckenmiller. “He was one of the earlier innovators in the genre of global macro. To not only survive, but thrive in our industry for 30 years is an outstanding achievement.”
Moore Capital, which managed $8.9 billion at the end of last year, will continue running partners’ money, and consolidate its three main macro funds into one. The firm will keep outside clients in funds run by two of its managers, and expects to launch new products overseen by top-performing traders, according to the letter.
Bacon founded Moore Capital in 1989, and in the following decade became one of the biggest macro traders, producing annualized returns of about 30%. Like other macro funds, he has stumbled since the 2008 financial crisis, halving that record.
Read more: Hedge Funds Hit by Investor Redemptions for 8th Straight Month
Mediocre returns have left the industry struggling to justify its relatively high fees. Moore Capital, along with other macro funds like Tudor Investment Corp. that trade everything from the euro to oil, have failed to beat broader markets in recent years amid soaring stock valuations and ultra-low interest rates. Clients have pulled $87.9 billion from hedge funds this year, more than twice as much as in all of 2018, according to data compiled by eVestment.
“Moore’s strong trading platform with our current roster of portfolio managers will do well on its own,” Bacon said in the letter.
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 him -- gained about 2%, according to an investor document seen by Bloomberg. All three funds that are returning client money, a group that also includes Remington Investment Strategies, have returned “low single digits year to date,” Bacon wrote.
“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 said.
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. The firm currently has 345 employees and is still hiring, a person familiar with the matter said.
Bacon joins fellow macro traders who have returned client capital to either run a trading firm with their employees or convert to a family office. In 2010, Stan Druckenmiller stepped back from managing outsider money after three decades at Duquesne Capital Management. Michael Platt turned his BlueCrest Capital Management into a trading firm in 2015.
Other managers have been spurred to restructure their businesses. Billionaire macro trader Paul Tudor Jones dismissed 15% of his staff in 2016 and then shut the Discretionary Macro Fund at Tudor Investment Corp. Bacon slashed some of Moore’s management fees three years ago and later cut about 30 jobs in London in New York. The firm said at the time that the reduction in staff was part of a response to the trading environment.
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 Donald 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.
Moore’s remaining funds are an inflation and fixed-income portfolio run by Joeri Jacobs and two asset-backed funds run by Erik Siegel. The new products Moore could launch include macro, long-short equity, private equity and real estate, the person said.
While Bacon plans to spend more time on other interests, he raised some doubts that he will be able to stay away from trading. “Time will tell how eagerly I pry myself away from daily markets, or return if do,” he wrote.
--With assistance from Nishant Kumar.
To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net;Katia Porzecanski in New York at kporzecansk1@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Josh Friedman
©2019 Bloomberg L.P.