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Hedge fund Caxton Associates has lost at least $600mn in this month’s market upheaval sparked by the war in the Middle East.
Caxton’s $9bn Macro fund lost 7 per cent last week, according to two people familiar with the returns. The fund is down roughly 1 per cent for the year after the losses, as the huge swings in energy and bond prices cause a setback for so-called macro funds, which aim to profit from bets on economic trends.
Tudor Investment Corporation, another prominent macro hedge fund run by Paul Tudor Jones, has lost 1.8 per cent, according to people familiar with the figures, though the fund is still up 0.9 per cent for the year.
The US and Israeli attacks on Iran have ripped through markets as Tehran’s retaliation all but closed the vital Strait of Hormuz to shipping, driving oil prices above $100 a barrel this week in highly volatile trading.
Investors have bet that the Bank of England and the European Central Bank will be forced to respond to the inflationary energy shock by shelving interest rate cuts, or even lifting borrowing costs. UK government bonds were hit the hardest in the resulting debt sell-off.
Caxton chief executive Andrew Law had previously been optimistic about the outlook for gilts, telling the FT in November that UK borrowing costs could fall closer to those of other major economies, adding that he thought there was a “mispricing” in UK yields.
Caxton did not immediately respond to a request for comment. Tudor declined to comment.
Other popular hedge fund bond trades, including so-called steepener bets that short-term debt would outperform, have been upended in the carnage, traders say.
“There was a lot of pain in the market,” said one senior trader, describing “squeezy price action” as hedge funds were forced to exit lossmaking trades.
“No allocation worked except [reducing leverage],” said another senior trader. “Everyone lost money.”
Caxton founder Bruce Kovner and Tudor Jones are among Wall Street’s best-known macro traders, having made their name in the strategy’s heyday in the 1990s, when traders such as George Soros and Stanley Druckenmiller placed billions of dollars’ worth of bets on the directions of countries’ economies by trading currencies, bonds and other assets. Kovner fully handed over the reins of his hedge fund to Law in 2011.
After a challenging period following the global financial crisis, macro funds had been enjoying a renaissance, and had their best year since at least 2008 in 2025. But funds in the sector have had to navigate a period of elevated volatility this year, triggered by the US operation to remove Venezuelan leader Nicolás Maduro at the start of the year and now the war in Iran.
“The tone had been so positive to start the year,” said one portfolio manager at a rival firm, adding that macro hedge funds had been performing well, especially in emerging markets. “That has completely reversed in one week.”
The scale of market gyrations in recent weeks has tested macro funds’ ability to quickly get out of trades that begin to turn against them.
“It’s a profound event for all investors, not just macro investors,” said one prominent macro hedge fund manager. “[US President Donald] Trump has shown that he’s not afraid to wield a pretty heavy stick. As a trader, it’s a good time to lay low.”
Additional reporting by Ian Smith
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