Exclusive: Hedge Fund Caxton Recovers Performance Losses Amid Bond Rout

By Nell Mackenzie

LONDON – Renowned hedge fund manager Andrew Law’s Caxton Associates, which manages $12.5 billion, has successfully recouped a significant portion of its earlier losses this year, largely due to strategic bets on declining bond markets, according to multiple sources familiar with the situation.

Caxton Global Investments (CGI), the flagship fund within Caxton Associates and valued at $8.6 billion, concluded October with a monthly performance increase of approximately 2%. Although the fund’s performance remains down about 2% year-to-date as of the end of October, it had been down roughly 8% at the end of June, as reported by one source.

Requests for comments from Caxton were not immediately responded to via phone or email.

The CGI fund capitalized on expectations that the Bank of Japan would start to ease its consistently loose monetary policy, according to two sources. Additionally, successful short positions on falling bond prices and bets on a steepening U.S. Treasury yield curve were among the fund’s most profitable strategies.

Both the Bank of Japan and the Federal Reserve opted to maintain their current interest rates in their most recent announcements. Fed Chair Jerome Powell suggested that U.S. policymakers are assessing whether financial conditions are sufficiently tight to manage inflation or if the economy—continuing to exceed expectations—requires additional constraints.

In contrast, the Bank of Japan made adjustments to its 1% yield cap, allowing long-term borrowing costs to rise, while also upgrading its price forecasts to indicate that inflation is likely to surpass the 2% target this year and next.

Further boosting the CGI fund’s performance was a profitable strategy that leveraged the disparity between Japanese and U.S. stock prices. However, losses on commodity investments in gold and a yen hedge slightly hindered overall performance.

Caxton Associates was established by Bruce Kovner, who managed the fund for 28 years before appointing his chief investment officer, Andrew Law, to take over in 2011.