Caxton Founders Retire, Tap CIO as Successor

(September 13, 2011) — Caxton Associates founders Bruce Kovner and Peter D’Angelo are set to retire from the $10 billion hedge fund firm.

Kovner, who developed Caxton Global Investments into one of the world’s biggest global macro hedge funds, is expected to pass on the baton to his chief investment officer, Andrew Law, a former proprietary trader for Goldman Sachs who joined the firm in 2003.

“After 34 years in the trading business and 28 years leading Caxton, the time has come to hand the leadership of the company to a new generation,” Kovner wrote in a letter sent to investors on Tuesday, according to Bloomberg. “I do so knowing that I will miss the adrenalin rush of confronting the markets every day but also confident new leadership will carry on the traditions, style and substance of Caxton’s successful history.”

Kovner added: “Although I will miss the stimulation and camaraderie of daily involvement at Caxton, I am also very much looking forward to spending more time n the many interests I have outside of the trading arena. These include my work at the Julliard School, my efforts in education reform, my family foundation and other philanthropy, and the nurturing of new companies particularly in the areas of drug discovery and medical technology. Most of all, I look forward to spending more time on the simple pleasures of life.”

In a separate letter to investors, Law said he will focus on trading and will form an operating committee that will meet with him on the firm’s operations on a weekly basis.

Caxton has achieved the status of becoming one of the $2 trillion hedge fund industry’s most profitable funds. According to Kovner, the fund has achieved a compound rate of return of more than 21% while returning more than $12 billion for its investors.

Turbulent markets following the financial crisis have made it especially difficult for portfolio managers to achieve robust returns. Kovner’s tremendous influence in the hedge fund community and his success despite market volatility raises the issue of key-man risk, which was detailed in aiCIO‘s latest issue. “Asset managers are, by their nature, dependent on key individuals but, as institutional mandates edge ever more aggressively into alternative investments and complex fixed-income deliverables, key-man risk is being elevated to levels never before seen,” aiCIO reported.

Kovner’s perhaps key-man status compares with those of other notable investors such as George Soros, John Paulson, and Paul Tudor Jones. Kovner’s decision to exit the hedge fund business follows Soros’ announcement that his Quantum fund was closing to outside investors in July. Meanwhile, in 2010, Stanley Druckenmiller announced the liquidation of his firm Duquesne Capital.

Should asset owners be investing with managers that place so much weight on a single individual’s shoulders? Click here to read an aiCIO feature.