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London-based hedge fund Caxton Associates has extended its losses to more than $1.3bn this month as the Iran war causes shockwaves in global markets.
Caxton’s $9bn Macro fund, which is run by chief executive Andrew Law, is down 15 per cent this month to Friday, according to two people who had seen the numbers.
The FT reported earlier this month that the fund had lost 7 per cent, or at least $600mn, in the first week of March.
The losses make Caxton one of the highest profile hedge funds to suffer losses as the conflict in the Middle East upends energy and bond markets.
Traders have dumped government debt around the world in the expectation that soaring oil and gas prices will drive up inflation significantly, potentially forcing central banks to lift interest rates. Brent crude has soared above $100 a barrel as Iran has closed the Strait of Hormuz, restricting a vital artery in the world’s oil trade. It dipped below that level on Wednesday after the US sent Iran a 15-point plan to end the conflict.
The move in bonds has hit hedge funds that were positioned for rate cuts or that were running so-called steepener trades — bets that shorter-dated bonds will perform better than longer-dated ones. UK government bonds in particular have suffered, with 10-year gilt yields surging to their highest level since 2008.
Law was optimistic about the outlook for gilts at the end of last year, telling the FT that there was a “mispricing” in UK yields and borrowing costs would fall closer to those of other major economies.
Caxton also profited from bets on gold and copper last year. Gold, often viewed as a haven asset, has suffered, falling 15 per cent since the war began at the end of February, while copper is also down.
One macro hedge fund manager said it was particularly difficult to navigate the conflict due to “false dawns on tweets and U-turns” from US President Donald Trump. On Monday the president posted on Truth Social that in recent days there had been “productive conversations” with Iran to end the war, having previously threatened to bomb Iranian energy facilities. The post sparked a rally in government bonds and the price of oil fell.
