Hedge fund Caxton makes $270mn in market turmoil

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Hedge fund Caxton Associates has made gains of about $270mn this month, as bets on US government debt and the Japanese yen made it one of the big winners from the recent turmoil in global markets.

The London-based firm made 3.9 per cent in its $4.5bn Macro fund, which is personally managed by chief executive Andrew Law, in the first nine days of August, according to numbers sent to investors and seen by the Financial Times. It also made a gain of 1.1 per cent in its $8.5bn Global fund, according to an investor.

The profits come in a turbulent month for global markets, driven by fears that the US Federal Reserve has been too slow to cut interest rates in response to signs of a slowing economy.

US megacap technology stocks and Japanese equities were among the worst hit in the rout, while the market’s “fear gauge” of volatility hit its highest level since the early days of the coronavirus pandemic. 

Caxton declined to comment.

Caxton, which manages $13.5bn in total assets and is one of the world’s best known macro hedge funds, was helped by a bet that short-dated US Treasuries would outperform longer maturities, according to people familiar with its positioning. These so-called “steepener” trades have performed well in recent weeks as investors have started to price in rapid rate cuts by the Fed.

The firm also profited from a bet on the yen, which rallied strongly against the dollar over the past month as investors who had borrowed the Japanese currency to invest in higher yielding assets quickly unwound those positions.

The gains leave Caxton Macro up 9.9 per cent so far this year, according to the investor update, following gains in July, while the Global fund is up 5.2 per cent.

Kirkoswald Capital, the firm run by Australian hedge fund star Greg Coffey, also made “hundreds of millions” of dollars during the market chaos, the FT reported last week.

Macro funds, which bet on moves in global bonds, currencies and other assets, on average have gained just 0.2 per cent so far this year to Monday, according to an index compiled by data group HFR.

Caxton, which was founded by US billionaire Bruce Kovner in 1983, in its early days used to fly copies of the FT from London to New York, which it claimed gave it an advantage over its rivals.

In 2022 it told investors it would shut its Macro fund to new money, following big gains, to avoid it becoming too large and potentially damping returns.