In an unexpected twist of events, Louis M. Bacon- founder and driving force behind Moore Global Investment Fund- has today decided to give back $2 billion to investors.
Despite the fact that Bacon’s peerless style of investment attracts a lot of canny investors; the famous investor has opted to acknowledge the prevailing economic situation by giving back money to investors.
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
While different people hold varied opinions over the issue, the truth behind the matter is that the market has dried up and ideas have fled. All this is traceable to the deathblow-or coup de grace as I like to call it- that hit the European market and paralyzed all fashions of progress.
Bacon was particular to point out that the last 18 months were disappointing at the least, citing that this year’s second quarter was incredibly tough. The 3.18 percent dip in his main fund during the second quarter perhaps indicates the bearish theme that has since shrouded his investments, and the market at large.
In his writing, Mr. Bacon remarked that if reducing the price of his funds was the only way to give clients a return on their investment, he was comfortable to do it. This perhaps indicates the importance that the investor attaches to his clients.
Interestingly, Bacon’s move came as a surprise. Why is this so? Though rare, hedge funds occasionally return money to their investors. Nonetheless, returning of funds is usually accompanied by a lot of reluctance. Bacon has surprised investors as he has not in any way given in to any form of reluctance.
If you choose to take an objective look at the matter, it becomes evident that Mr. Bacon is going to notably reduce the size of his investment. Before the give back, Bacon charged a 3 percent investment management fee on the $14 billion in his stable. By giving back, he will lose a considerable amount of revenue.
Through it all, Bacon tried to repeatedly hint that the core reason behind the move was the uncontrollable economic condition, suggesting that the move was inevitable. “I am going to let some people down,” he said.
Bacon now joins a list that is all too familiar with legendary value investor Seth Klarman, founder of the Baupost group. Klarman made the news two years back when his fund gave back 5 percent of capital to investors. This move came after Baupost had recorded an exceptional performance. At the time, Klarman cited that the funds were too large for the then market conditions.