More macro funds might consider retuning funds
Will other macro fund managers follow the lead of Louis Bacon and return money to limited partners?
At this point, few people expect a rush of funds to follow suit, but more funds will likely consider making similar moves, amid a punishing investment environment. The best bet for many large funds may well to raise their chances of performing well by limiting the size of their funds. After his decision to return $2 billion to investors, Bacon will still manage in the $6 billion range. Other funds have made similar moves.
Brevan Howard returned $2 billion and said it would cap the fund's size at $25 billion, and Paul Tudor Jones, Steven Cohen, and Daniel Loeb have shut their funds to new clients. Performance tends to drive these decisions. Bacon has struggled recently, and was down 2 percent last year, though he's up 0.35 percent in the first half of the year. In his glory years, Bacon fared much better. In 1990 and 1992, he returned 86 and 45 percent respectively. Reuters notes that Bacon charges a 3 percent management fee, which means he will give up $60 million a year.
Right now, the investment climate seems tailor made for hedge funds. Macro funds are supposed to be smart enough to make money in volatile times, but correlation has proven to be the bane of many. Investors poured money into these funds earlier this year, but have generally been disappointed.
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