A trading era has ended. Louis Bacon, a pioneer in macroeconomic trading, announced that he is leaving the game. Bacon led the multi-manager fund Moore Capital through years of astonishing profits. However, he recently stated that he would be returning all invested capital in an effort to privatize the company. A shrinking pool of available trading talent and ever-falling fees at competitors contributed to his decision. While Moore Capital will remain in existence, it will no longer manage outside money. Instead, it will solely handle the funds of Bacon and staff members.
Fees that were once standard for this form of management have now dropped to almost zero. This intense pressure makes it difficult to turn a profit on money management – leading to decisions like Bacon’s. Further, there is a possibility that Bacon’s long-running feud with Peter Nygard may have contributed to his choice to close Moore Capital. The two have traded legal suits for the past six years, mostly in relation to adjacent properties in the Bahamas.
Who is Louis Bacon?
Bacon rose to prominence in the late 1980s and into the 1990s. Leveraging $25,000 inherited from his mother, Bacon made smart bets on a variety of macroeconomic factors. His first big break came when Saddam Hussein invaded Kuwait in 1990 – Bacon had invested heavily in oil. Where many were blindsided by the invasion, Bacon correctly bet on the dictator’s power play.
This began a prolonged campaign of correctly identifying upcoming global events. Through analysis of growth, inflation, policy and politics, Bacon navigated the currents of global macroeconomics. However, the advent of algorithmic trading signaled the end of managed macro trading.
Macro Funds versus Algorithmic Trading
Macro funds depend on individual traders correctly analyzing global trends. The strategy proved remarkably effective – until computers surpassed individual traders. Now, these money managers face off against algorithms that squeeze the smallest margins for profit. These artificial intelligence programs can spot minute changes in the markets and exploit them in real time.
To further complicate the situation, central bank interventions can spoil macroeconomic trade strategies. This decreased level of volatility may be good for the average national economy, but stunts hedge fund manager’s ability to predict predominant trends.
Article By: Adam Stone