Institutional Investor's Alpha Magazine - June 2008 - (Page 38)

ALPHA HALL OF FAME LOUIS BACON Who has had the biggest inﬂuence on your career? My friend Paul Tudor Jones. We were both Southerners in the big city of New York. Paul got me my ﬁrst job, with E.F. Hutton as a runner on the ﬂoor of the cotton exchange. That was many moons ago, but I would say that his real mentorship came when I started trading commodities and launched a CTA fund. I didn’t know that it would turn into a hedge fund, but when I started to raise money for a hedge fund, he was a big supporter with his investors. His approach to research and trading had a real impact too. He wasn’t worried about small stuff. He taught me to think in points, not dollars, and he always used to say, “It’s just points, it is not money.” He gave me an ongoing tutorial in disassociating oneself from the result of the trade, yet still having passion about it. ne of the most highly regarded macro traders ever, Louis Moore Bacon is the rare investor who can boast the hat trick of having made money on Black Monday in October 1987, the dot-com implosion in March 2000 and the subprime crisis that began in the summer of 2007. Bacon, the founder of the $20 billion Moore Capital Management — which operates from London and New York — is guided by aggressive risk management and an interest-rate-driven view of the markets. Since its inception in 1990, Bacon’s ﬂ agship Moore Global Investments fund has delivered annualized returns of nearly 22 percent. “If you look at Louis’s long-term track record, there is probably no trader alive who has better risk control on an asset base his size,” says Paul Tudor Jones II, a fellow Hall of Famer. He has been equally ahead of the curve in identifying environmental conservation as a key global concern through his Moore Charitable Foundation. Bacon, 51, a native of North Carolina, also has ties to Hall of Famer Julian Robertson Jr., whose sister is married to Bacon’s father. Why do you live in London? Living here gives me broader perspective on a number of different countries. I ﬁ nd it ideal to be based in this time zone, and I use the time advantage to set up early for the U.S. markets. How do you decide where to invest? We tend to make top-down, interest-rate-driven investments. We’ve been pretty U.S.- and European-centric throughout most of Moore’s history, and we have been pretty closely focused on what happens with the interest rate cycle and the reactions that it drives around the world. But our focus is shifting now because micromarkets — and those can be anything from individual equities to commodities and emerging markets — are becoming more and more dominant. What accounts for Moore’s success? “I started my career in futures, and the rallying cry was always free markets for free men, so I’ve tried to create LOUIS an open BACON architecture.” Hard work, patience, knowing when to hold ’em, fold ’em or go all in. We have a rigorous risk framework, and although I do not micromanage every position, my portfolio managers understand the risk format prior to joining the ﬁrm. Does the label “global macro” reﬂect your style? We kind of had the moniker “global macro” thrust upon us. We didn’t sign up for it. But I look at it as kind of the 007 license to do whatever we want, and we’re in a period now where globally there is no lack of opportunity: in ﬁ xed income and currencies and the distressed and credit markets. We don’t have to try and decide to make our money in any one instrument or strategy — we can invest in private equity, individual equities or arbitrage. We feel that we are versatile enough that we can move into a number of different strategies, and if doing that means that we’re global macro, then we’re not going to argue with the label. Are there historical precedents to the current turbulence? Photographed by Derrick Santini for Alpha on June 3, 2008, in London. You can ﬁ nd similarities, but this situation is shaping up to be a long-term bear market — and it is corresponding with a secular decline in American ﬁ nancial power. You have to 38 • INSTITUTIONAL INVESTOR’S ALPHA • JUNE 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - June 2008

Investor's Alpha Magazine - June 2008 Contents Letter From the Editor Longs & Shorts Cover Story: Alpha Hall of Fame Bruce Kovner Michael Steinhardt Kenneth Griffin Louis Bacon Steven Cohen George Soros James Simons Seth Klarman Julian Robertson Jr. Jack Nash Leon Levy Paul Tudor Jones II Alfred Winslow Jones David Swensen Looking Ahead: Back to the Future Research Center: Europe Hedge Fund 50 Unhedged: Let the Sunshine In

Institutional Investor's Alpha Magazine - June 2008

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