If 2017 was a terrible year for hedge fund Caxton Associates in Europe, 2018 was far, far worse.
When Caxton Europe published its accounts for 2017 last year, there was talk of a profits "collapse." The fund has just published its accounts for 2018 and collapsing profits have become a large loss. In 2018 Caxton made a loss of £4.4m, down from a profit of £7m the year before.
Caxton's fate follows what the fund describes as a reduction in assets under management and a decision to cut fees in 2016. Between 2017 and 2018 management fees at Caxton Europe Asset Management Limited fell from £34m to £12.4m. Administrative expenses weren't as downwardly mobile, and remained at £17m. Hence the loss.
Caxton is one of the oldest hedge funds and was founded in 1983 by U.S. investor Bruce Kovner. Kovner retired in 2011 and London-based Andrew Law succeeded him. Law has been moving Caxton's operations to London from New York, which might explain why - even as profits evaporated, UK headcount increased from 45 to 52 people.
Pay, however, has been slashed. In 2018, Caxton Europe Asset Management Limited spent £10m on salaries and bonuses, down from £20m the previous year even as headcount increased. Average pay per head went from £444k to £200k over the same period.
Someone - probably Law - also took a big pay cut. The highest paid partner in Europe took home £1m last year, down from £4m in 2017. The number of partners was also trimmed, from 10 to seven, and the £4m loss meant most partners were left licking their wounds rather than withdrawing large bonuses. It's a big change from 2016, when London partners shared £95m.
Caxton is doing far better in 2019, with the main macro fund reportedly up 16% in the year through to September. This is its best performance since Kovner retired. Law may be finding his feet - finally.
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