Hedge Funds Caxton, Element Slump in Brutal First Half for Macro Traders

The first half of 2023 proved to be a washout for some of the world’s biggest macro traders as they struggle to recoup losses sparked by volatile bond markets.

(Bloomberg) — The first half of 2023 proved to be a washout for some of the world’s biggest macro traders as they struggle to recoup losses sparked by volatile bond markets.  

Andrew Law’s Caxton Macro hedge fund deepened its decline in June to end the first half down 20%, while Jeff Talpins’s Element Capital Management suffered a 7.7% loss last month to extend its slump this year to 15.4%, people with knowledge of the matter said. 

Others such as Said Haidar and billionaire Chris Rokos made money in June, but fell short of recovering their losses from March this year when the collapse of Silicon Valley Bank sent shock waves across global markets and hurt their leveraged bets in the rates market.       

“March was the determining factor for macro lackluster result,” said Edouard de Langlade, founder of EDL Capital whose $1.1 billion hedge fund is among few macro money pools that have seen returns this year. “Most macro stopped out on the fixed income move due to Silicon Valley Bank failure.”  

A representative for Caxton didn’t respond to requests for comment, while those for all the other firms declined to comment.

Macro investors, who use borrowed money to inflate their wagers on economic trends, faced sharp market fluctuations in March as SVB’s failure triggered concerns of an imminent banking crisis. The moves in asset prices topped even those caused by the collapse of Lehman Brothers Holdings Inc. in 2008, the Sept. 11, 2001 attacks, the bursting of the dot-com bubble and emerging-markets crises of the 1990s.

Some famed money managers from Chris Rokos to Said Haidar suffered double-digit losses, while veteran macro trader Adam Levinson shut down his hedge fund. Brevan Howard Asset Management ended a relationship with US hedge fund firm Commonwealth Asset Management.

While some firms,  including Rob Citrone’s Discovery Capital Management, Greg Coffey’s Kirkoswald hedge fund and Keith Decarlucci’s Melqart KEAL Macro — which has money from investors including Blackstone Inc. — have made money, the sector as a whole has seen reversal of the stellar gains they made earlier from successful short bets on bonds as interest rates began to rise in response to soaring inflation.

Now they face challenging markets with investors pulling about $2 billion from them this year, according to data compiled by eVestment. 

Haidar and Rokos, who both recorded their best-ever year of gains last year have struggled to make money in 2023. Rokos nearly recouped all his losses in his more than $14 billion hedge fund last month after he suffered declines in excess of 15% at one point in March, forcing him to de-risk his hedge fund.

Talpins’s Element, which managed $12.6 billion in January, had been encouraging investors to pull their cash from the fund and expelling some who refuse to do so as it sought to shrink assets by about $3 billion to be more nimble after two straight years of losses. The fund manages about $8 billion now.

“The Fed is telling you what it’s going to do but the market seems slow at factoring it in,” said Decarlucci. He predicts an equally challenging second half for macro traders.

–With assistance from Greg Ritchie and Katherine Burton.

(Updates with Discovery Capital in table and eighth paragraph.)

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