Tudor to Shutter Discretionary Macro Fund in RestructuringBy
Flagship Tudor BVI fund will be the only multi-trader fund
Paul Tudor Jones says macro trading on verge of big change
Paul Tudor Jones is shaking up his hedge fund, which has been battered by investor withdrawals.
Tudor Investment Corp. is closing its Discretionary Macro fund and letting investors shift assets to the main BVI fund as of Jan. 1, according to an investor letter seen by Bloomberg News. Jones will also principally manage Tudor’s flagship BVI fund, which will be the firm’s only multi-trader fund next year, the Nov. 30 letter said.
Andrew Bound and Aadarsh Malde, who were co-chief investment officers of the Tudor Discretionary Macro Fund, will be leaving by mutual agreement, the letter said. The fund, which lost 1.6 percent this year through Nov. 3, is made up of multiple managers not including Jones himself. Jones, who ran the BVI fund with a team of managers, will now have a smaller team and will assume a more dominant role in the fund.
"I will be the largest risk taker and will manage a notional capital account equal to the AUM of the Tudor BVI strategy itself," Jones said in the letter, referencing assets under management. "This means that my results will have a one-for-one performance impact on Tudor BVI. I relish this challenge."
Jones and other Tudor partners are the largest investors in the BVI fund, which is up 0.8 percent this year through Nov. 3, a separate investor document showed.
A spokesman for the firm declined to comment.
Years of central bank monetary easing has suppressed market volatility, hurting macro fund returns and spurring investor withdrawals. Clients pulled a net $500 million from Tudor in the third quarter, leaving the firm’s assets at $7 billion, about half the level it managed in June 2015, Bloomberg News reported in October. Jones, who has been frustrated with the macro trading environment, said things are "on the verge of a significant change" and that the current market is reminiscent of the bubble of 1999.
"That was a year in which Tudor BVI’s macro book was basically flat while U.S. equities experienced one of the greatest bubbles in history,” Jones, 63, wrote. “The termination of that bull market kicked off a three-year macro feast.” That storyline is much the same today, with bitcoin and fine art taking the place of the Nasdaq 100 of 1999, he wrote.
The low volatility market environment has been an "anathema" to traditional macro funds and is becoming a "dangerous place," lulling investors into a false sense of complacency, Jones wrote in a separate Nov. 30 market note.
"In the face of a shock, investors may be surprised to find themselves jammed running for the exit," he wrote. The amount and quality of liquidity is lower than people recognize, and hidden leverage in the market will make a mass exit even more challenging, he said.
The firm opened the Tudor Discretionary Macro Fund in 2012 with $500 million. It had 14 portfolio managers and was seeded with $150 million from the firm. At the time, funds that bet on macroeconomic themes were a big draw for investors who expected the strategy to benefit from events such as the European sovereign debt crisis.
Those expectations were dashed as the strategy has produced lackluster returns in recent years. Hedge funds betting on macroeconomic themes climbed an average of 3.8 percent this year through October on an asset-weighted basis, to rank as the worst strategy globally, according to Hedge Fund Research Inc.
Billionaire Jones, a pioneer in the industry, has turned to more computer-driven trading and hired scientists and mathematicians to help revamp the firm. Tudor raised about $300 million for a new macro fund, which started trading in October, that uses machine-learning algorithms to help its manager make trades.
— With assistance by Katherine Burton