User: KPings: Economic Conditions: Louis Bacon to Return $2 Billion to Investors - Deal Journal - WSJ

Louis Bacon to Return $2 Billion to Investors - Deal Journal - WSJ

Louis Bacon Returns $2 Billion to Investors. Government intervention has distorted markets......trendless volatility....

By Juliet Chung

Star investor Louis Moore Bacon plans to return $2 billion from his flagship hedge fund, or a quarter of the fund’s assets under management, citing a lack of investment opportunities and recent poor returns.

In a letter to investors in Moore Global Investments dated Aug. 1, he wrote that government intervention in markets had distorted them to such a degree that finding profitable investment opportunities had become difficult in the so-called macro fund, which makes bets based on financial and economic trends. He said he was struggling with short-lived market rallies “that exacerbate trendless volatility,” a market condition that he says dampens returns.

“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 and the return they are hoping for or expecting,” wrote Mr. Bacon.

Running the fund at a smaller size would help him determine whether managing a large pool of assets was an issue, he wrote.

News of the move was earlier reported by the New York Times and Bloomberg.

The decision comes amid poor returns recently for the fund, and by macro hedge funds in general. The Moore fund lost 2.2% last year and was down 1.17% in the second quarter, according to the letter, bringing its returns for the first half of the year to 1.82%.

Last year, macro funds lost an average of 4.2%, according to Hedge Fund Research Inc., compared with the 2.1% gain by the Standard & Poor’s 500-stock index. In the first six months of this year, macro funds on average lost 0.5%, compared to an 9.5% gain by the S&P 500.

Mr. Bacon started his Moore Capital Management more than 20 years ago with a $25,000 inheritance from his mother. The firm manages about $10.7 billion in its hedge funds. Moore Global Investments has scored annual gains of about 18% on average.


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