Hedge Fund Titan Plans to Return $2 Billion to Investors BY LANDON THOMAS JR.
Simon Dawson/Bloomberg News Louis M. Bacon, left, founder of Moore Capital Management, and Howard Cox of Greylock Partners at Davos in January. LONDON — A hedge fund titan has decided to return a large sum of money to investors, a revealing illustration of how dried-up markets, vicious volatility and a paralysis of ideas all borne of the crisis in Europe have been particularly hard on the traders who swing for the fences on currencies, stocks and bonds all over the world.
Louis M. Bacon, who together with Paul Tudor Jones and George Soros has come to define this style of high-stakes macro investing for more than 20 years, said in a letter to his investors on Wednesday that he would be giving back $2 billion, about one quarter of the size of his benchmark Moore Global Investment fund.
He cited 18 months of what he called “disappointing” investment returns — and a particularly tough second quarter this year when his main fund was down 3.18 percent.
“I am more comfortable taking down the size of the fund than increasing the size of the positions in order to give clients an adequate return given the fees they are paying,” Mr. Bacon wrote.
Name-brand hedge fund investors will from time to time return money during fallow performance stretches, and Mr. Bacon is no different in this regard. But most do it with reluctance. For starters, such a step is costly.
Bill Cunningham/The New York Times Louis M. Bacon in 2001. Mr. Bacon, who deploys an expensive investment apparatus with about 400 professionals in his two main New York and London offices, charges a 3 percent management fee on the $14 billion he oversees (before the giveback), one percentage point higher than the industry average.
That means he loses a chunk of revenue right off the bat and more if performance turns around and that upside (a 25 percent performance fee) is forgone as well.
More so, however, is the psychic impact. For this supercompetitive breed, to admit that a market has confounded them is to concede a small measure of defeat.
