Billionaire investor Louis Bacon chalked up one of the biggest profits of his long trading career during 2020’s market turmoil, helped by a decision to return money to outside investors that cleared the way for riskier bets.
The veteran fund manager’s firm, Moore Capital, which now manages money primarily for Mr Bacon and other employees, gained more than 70 per cent last year, said people familiar with its performance, after profiting during last March’s coronavirus-driven slump and its aftermath. Moore’s gains equated to several billion dollars, one person said.
Moore, which cited a “challenging business model” when it told investors in late 2019 it was closing its flagship hedge funds to external money, has been helped by a newfound ability to take more risk and tolerate more volatility in its performance, said one of the people.
Big institutional investors, which have come to dominate the hedge fund industry’s client base since the financial crisis, provide huge amounts of inflows but tend to be more risk-averse and have often tried to constrain traders’ bets. Such constraints can cap losses but also limit gains.
Moore’s 2020 returns would have ranked it as one of the world’s top-performing hedge funds, in what has turned into the industry’s best year since the aftermath of the financial crisis.
Moore declined to comment.
Mr Bacon’s performance echoes that of Michael Platt’s BlueCrest Capital, which in late 2015 said it would convert into a family office to manage money primarily for Mr Platt and other staff. Mr Platt said at the time that his bets had been constrained by institutional investors, and that returning external money would allow him to take more risk. His firm went on to record gains of around 50 per cent or more in 2016, 2017 and 2019.
Mr Bacon began his career in the 1980s and is known for making large profits during bouts of market volatility, such as the 1990 crash in Japanese stocks, and Black Wednesday in 1992, when the UK pound was forced out of the European Exchange Rate Mechanism.
The manager said in 2019 that returning outside money would allow him “more personal time for a large family, philanthropic pursuits and to continue to develop a number of sports oriented properties — all with the flexibility to ‘stay in the picture’ or not as things develop”. However, the huge levels of market volatility experienced last year meant he has been very involved in Moore’s trading.
Mr Bacon bought US government bonds in February, shortly before they soared to record highs as the Federal Reserve slashed interest rates and investors fled to haven assets. Moore was later also able to profit from bets on equity and company debt likely to do well out of the crisis while betting against those likely to suffer, one of the people said.
The fund manager, who still spends some of his time in the firm’s London office in the heart of Mayfair, roughly doubled his money in his own trading portfolio during the year, while the firm’s other portfolio managers made around 60 per cent, the people said.
The firm is one of the best-known names in macro trading — where investors bet on the direction of bonds, currencies and stocks around the world. Macro hedge funds that registered one of their best-ever performances in 2020 included Andrew Law’s Caxton Associates, which gained 42 per cent, while Brevan Howard added 27 per cent, said people who had seen the numbers.