Billionaire Louis Bacon is effectively quitting the hedge-fund business after several years of poor performance, bringing an end to his three-decade run near the pinnacles of global finance.
Mr. Bacon, 63, will return outside investors' money and step back from trading, his firm, Moore Capital Management, said in a Thursday letter to clients. The move caps a storied career that has traced the arc of modern finance, from the swashbuckling money managers who made fortunes in the 1980s and '90s to today's era of computer-dominated trading.
"Louis Bacon will go down as one of the giants of our industry," said legendary trader Stan Druckenmiller. "He was one of the earlier innovators in the genre of global macro. To not only survive, but thrive in our industry for 30 years is an outstanding achievement."
Moore Capital's funds will continue running partners' money, and the firm will launch some individual funds managed by its best-performing managers, according to the letter.
Mr. Bacon founded Moore Capital in 1989, and in the following decade became one of the biggest macro traders, producing an annualized return of roughly 30%. Like other macro funds, he has stumbled since the financial crisis, halving that record.
Mediocre hedge fund returns have meant a struggle for the industry to justify its relatively high fees. Moore Capital, along with other macro funds like Tudor Investment Corp. that trade everything from the euro to oil, have failed to beat the broader market in recent years amid soaring stock valuations and ultra-low interest rates. Clients have pulled $77 billion from hedge funds this year, twice as much as in all of 2018, according to data compiled by eVestment.
"Moore's strong trading platform with our current roster of portfolio managers will do well on its own," Mr. Bacon said in the letter.
Mr. Bacon lost 0.1% in his Macro Global Investment fund this year through October, while the Moore Macro Managers fund — which is run by a group that doesn't include Bacon — gained about 2%, according to an investor document seen by Bloomberg. All three funds that are returning client money, which also includes Remington Investment Strategies, have returned "low single digits year to date," Mr. Bacon said.
"Disappointing results of these funds of the last few years obviously inform this decision but our long term record is one we remain proud of," Mr. Bacon said.
Mr. Bacon said in the letter that stepping back would allow him to spend more time with family, on his philanthropic pursuits and to develop a number of "sports oriented" properties. The move will let Moore Capital be "more opportunistic" and "more competitive" in hiring and paying managers, he said.
Mr. Bacon joins fellow macro traders who have returned client capital to either run a trading firm with their employees or turn into a family office. In 2010, Stan Druckenmiller stepped back from managing other peoples' money after three decades running Duquesne Capital Management. Michael Platt turned his BlueCrest Capital Management into a trading firm in 2015.
Other marquee firms that have shut funds or returned investor capital in recent years include Jon Jacobson's Highfield Capital Management, Eric Mindich's Eton Park Capital Management, John Griffin's Blue Ridge Capital, Neil Chriss's Hutchin Hill Capital and Richard Perry's namesake shop.
Mr. Bacon had told investors at the end of 2016 that he was "exceedingly upbeat" for the first time in several years about the "game-changing trading opportunities that lie ahead." He pointed to President Donald Trump's victory in the U.S. election and the prospects for higher interest rates, a stronger dollar, booming corporate sector and improving market liquidity.
That didn't pan out. Moore Capital continued to shed assets, and its main funds haven't returned more than 6% a year since 2013.
"We have closed down a number of funds before in our 34 years of managing client assets so this wrapping up of client investment programs is not new ground for us," Mr. Bacon said in the letter. "We expect the large majority of the invested capital to be returned early in the first quarter of the coming year."