By Stephen Taub
Trip Kuehne, founder of Dallas fund of funds Double Eagle Capital Management, had been searching for a global macro manager for three years when he approached Stanley Druckenmiller for a recommendation. The Duquesne Capital Management founder, who was managing money for Kuehne at the time, suggested one of his generation’s best: Louis Bacon, founder of Moore Capital Management. “He said he was great and he won’t blow you up,” Kuehne recalls. “He’ll conserve your money.”
||Louis Bacon: Watching half your asset base redeem even while performing in a stable manner was too unnerving for heroic investing|
Somewhat ironically, Kuehne invested with Bacon last June, the month after Bacon suffered his worst-ever monthly loss—9.2%—in part because of the macro manager’s belief that the euro would fall apart. “I got fairly lucky,” Kuehne says.
But has Bacon’s luck run out? In 2010, he came back to post a 4.58% gain in the flagship but is floundering again this year—with many funds in the red through May. As has been the case with so many of his peers, recent years have been challenging in many ways. While grappling with last year’s tough markets, Bacon ran into trouble with regulators, with a London trader accused of insider trading and the New York operation settling charges with the U.S. Commodity Futures Trading Commission that it tried to manipulate the settlement prices of platinum and palladium futures contracts on the New York Mercantile Exchange.
Yet more than 20 years after launching his first hedge fund, the 54-year-old Bacon, who is super secretive even by hedge fund standards, still enjoys elite status among the hedge fund set. In the past four years, his total returns have outshone those of his closest macro rivals: Paul Tudor Jones and Caxton’s Bruce Kovner. But the yearly numbers have been volatile. Bacon lost 4.32% in his flagship in 2008—lagging AR’s Macro Index as well as Jones and Kovner, but he vastly outperformed those managers in 2009 with a 22% gain. (Bacon told investors he was disappointed in the showing, “given the opportunities at hand.”) This year things are dicey. Through May, the flagship had lost an estimated 2.50% for the year, compared with an average gain of 2.97% for the AR Macro Index. Investors say Bacon is cautious this year, maintaining a low risk profile, as he remains uncertain about economic growth.
But Bacon may have an ace up his sleeve: his Moore Macro Managers Fund, launched in 1993 and mostly run by an all-star lineup of 14 manager teams that do not include the Moore founder. Widely considered his legacy fund, Macro Managers has outperformed the funds directly managed by Bacon in two of the past three years. (See “Bacon’s legacy fund.”) Last year, Macro Managers gained 11.43%, more than double the flagship as well as Remington Investment Strategies, the domestic version of the flagship, which rose 6.75%. This year, Remington was down 0.43% through May, while Macro Managers fell 1.05%. Like the flagship, both are lagging the overall market but are in line with (or doing better than) some of Bacon’s macro peers: Kovner’s Caxton Global Investments was down 3.07% through May, while Jones’s Tudor BVI fell 0.28% through May.
It isn’t just his performance that is winning Bacon admirers either. In 2008, he also let cash-strapped investors redeem instead of side-pocketing or gating. As a result, Moore lost $5 billion from redemptions, which frustrated Bacon. “Watching half your asset base redeem even while performing in a stable manner was too unnerving for heroic investing—even when the opportunities were manifold,” he wrote to investors at the time.
The loss of investors led Bacon to create a dedicated marketing team whose goal is to get what one knowledgeable person described as “sticky capital from more institutional investors.” He launched two new funds in 2009: Moore Emerging Equity Long/Short Fund and Moore Emerging Fixed Income and Currency Fund. That year, Bacon also offered incentives to new investors in old funds, adding a class to the flagship and its onshore version that allowed investors to redeem quarterly within the first year for a 5% fee. After one year, those investors can redeem 25% of their assets quarterly without a penalty and additional funds for a 5% fee. This class is in addition to existing fund classes that offer either a rolling one-year lockup or a three-year lockup with quarterly redemptions after three years.
| ||Louis Bacon: A 22% gain in 2009 was disappointing, “given the opportunities at hand”|
It’s still somewhat of a tough sell, as Bacon has not had the bang-up success in the past few years of such star managers as John Paulson, Bridgewater Associates’ Ray Dalio or Appaloosa Management’s David Tepper. Today, Moore runs $15 billion, down from an all-time high of $20 billion. It’s the 17th-largest fund in the U.S., whereas it was the sixth largest in 2003, according to the Billion Dollar Club.
Many old-time macro players have found the past few years difficult, and Bacon is no exception. But although his performance has slid slightly, investors point out that he continues to regularly execute at a high level—and without taking outsize risk. Moore Global Investments, the flagship offshore fund launched in 1990 that Bacon still mostly manages, has an annualized gain of 20.50%, with only three down years. The annualized number—which was 23.86% in 2003, when Moore was profiled in the inaugural issue of Absolute Return—has come down in the past five years. Moore’s domestic counterpart, Remington—launched in April 1995—has compounded at 18.80% since inception and has had only two down years.
Moore Macro Managers, launched in August 1993 as the Moore Global Fixed Income Fund, has compounded at nearly 15% since inception through the end of 2010, but its performance has also slightly fallen over the past five years, though it has never had a down year. In 2003, its annualized return since inception was 18.8%.
Put it all together, and Bacon’s record is impressive. “He has an enormous ability to absorb information and translate it into trades. He is absolutely a legendary trader and risk manager who cuts his losses quickly,” says Antoine Bernheim, president of Dome Capital Management, which has been advising European institutional and private investors on their hedge fund portfolios since 1984 and was the first investor in Moore Global Investments in 1990, accounting for $1.5 million of Moore’s initial $1.8 million in assets. Despite that view, Bernheim redeemed in 2009, stating, “I am looking for the next Louis Bacon.”
Bacon himself has been troubled by his lackluster performance and will readily admit to some recent mistakes. For example, in a letter to investors, Bacon conceded it was “ill-fated” to have hired several of the successful portfolio managers at Amaranth Advisors and taken over its Canadian operation in 2006 after the hedge fund blew up from its natural gas bet. One year later, Moore closed down the operation.
Although Global Investments’ 2008 losses were minimal when the rest of the financial world was melting around him, Bacon told investors he should have sold losing positions more quickly and completely; he wound up losing 15% from peak to the October trough. “I felt totally demoralized as we had played for a financial panic and yet the fund had lost big,” he told investors.
||Fact File Moore Capital Management|
Assets under management: $15 billion
Flagship: Moore Global Investments
Performance: 20.5% annualized (January 1990–December 2010)
Offices: New York, London, Zurich, Hong Kong, Washington, D.C.
Founder: Louis Bacon
Undeterred, Bacon quickly went on a hiring spree. In late 2008, he hired star trader Greg Coffey, who had previously left GLG Partners and briefly considered launching his own firm until the financial crisis made fundraising difficult. Coffey took over Moore Emerging Markets and launched two emerging markets funds.
The uncertain future of bank prop desks also provided new talent for the Macro Managers fund. In 2009, Bacon brought in Erik Siegel, a credit specialist from Morgan Stanley; Garth Appelt, an emerging markets specialist at Goldman; and David Jasper, who was a Goldman Sachs managing director and the head of its emerging markets trading group in New York. In 2009, Bacon recruited Matthew Carpenter and Matthew Newton from Citigroup, where they ran the principal strategies team, to build a new equities team.Last year, Bacon hired Jean-Philippe Blochet, one of the founders of Brevan Howard, who came out of retirement to join Moore in a high-profile hire. Blochet abruptly retired May 31. “That was a big disappointment for them,” says one investor. “They thought he would be a top performer.”
Bacon has another new fund in the works: a relative value fund to be managed by Moshen Gahmi, who heads one of the 14 Macro Managers teams and served as the chief operating officer for three years until September 2008.
Born in Raleigh, N.C., Bacon comes from an illustrious Southern family. One of his ancestors, Nathaniel Bacon, was credited with launching the infamous Bacon’s Rebellion of 1676. His maternal grandfather, Louis T. Moore, was an environmentalist during the early 1900s in Wilmington, N.C. Last year, Bacon bought the Orton Plantation Gardens overlooking the Cape Fear River in North Carolina, which was built in 1735 by his ancestor Roger Moore, the son of former South Carolina governor James Moore and the grandson of Irish nobleman Rory Moore. Bacon’s father, Zachary Bacon Jr., was a North Carolina realtor who in 1959 formed Bacon & Co. and eventually ran Prudential’s and Merrill Lynch’s real estate operations in the state. After Bacon’s mother died when Bacon was in his 20s, his father married the sister of Tiger Management legend Julian Robertson, also a North Carolina native.
Bacon earned his B.A. in American literature in 1979 from Middlebury College in Vermont, where he was more likely to read the writings of Ernest Hemingway and Nathaniel Hawthorne than investment books. However, he spent a couple of summers during his college years working as a clerk for Big Board specialist Walter N. Frank & Co., having met the firm’s founder while working on a Long Island, N.Y., fishing boat. Bacon got hooked on investing, returning to school and earning his MBA in finance at Columbia University in 1981.
After graduating, Bacon, an outdoorsman who has long loved to hunt and fish and who now skis and plays tennis and squash, entered Bankers Trust’s sales and trading program. But it didn’t work out, and he went back to work for Frank, trading currencies. It was about that time Bacon became friends with Memphis native Paul Tudor Jones II, whom Bacon had met through a friend of his brother Zack. Jones got Bacon a job as a runner on the floor of the New York Cotton Exchange. The two Southerners clicked, and at the time took in the Manhattan singles scene together as bachelors. Today, they still speak at least several times each week. Bacon subsequently went to work at Shearson Lehman Brothers as a trader and broker of financial futures, eventually rising to senior vice president in futures trading. While at Shearson in 1987, he created Remington Trading Partners—unrelated to his current Remington fund except for the name—and like his buddy Jones, called the market crash, shorting S&P futures on the way down and then quickly reversing course when the market rebounded.
In 1989—at the age of 33—Bacon founded Moore Capital Management and launched Moore Global Investments in 1990, using $25,000 he inherited from his mother. He gave his new company his mother’s family name, Moore, which is also his middle name. Moore Capital is headquartered in New York City—its largest office—but for years Bacon worked out of London, figuring it has the ideal time zone to trade globally. Bacon moved from London back to New York last December, so his young children from a second marriage could attend school in the U.S. He also has a home on Long Island.
Altogether, Moore has 429 employees in offices in New York, London, Zurich, Hong Kong and Washington, D.C., including 178 investment professionals and a 25-person quantitative analysis and risk control group. Moore also has 139 individuals in its operations, finance and technology group. Moore offers six offshore funds plus domestic equivalents of the two largest funds. At year-end, Moore Global Investments and Remington managed a combined $8.2 billion, while the two versions of Moore Macro Managers managed $4.3 billion. Greg Coffey’s Moore Emerging Markets is the third-largest fund, with $1.5 billion. The other three funds each had between $81 million and $324 million at year-end.
Moore is a typical global macro player, taking large bets based on big macroeconomic themes and using cash, futures and derivatives to create the portfolio. Bacon participates in most of the global markets, basing his trades on judgments about future inflation and growth and central bank policy, as well as politics. He then identifies themes and investments to play the themes, all the time being fed ideas from his strategists and researchers.
“He can absorb a considerable amount of information and distill it down to a few trading ideas,” says someone who has known him well for many years. And it is not unusual for Bacon—who saves administrative work such as compensation and hiring for weekends—to have one overriding macro conviction but trade around it in the opposite direction.
In general, Bacon is credited for taking a lot of risk when he sees opportunities and paring it back when they are not there. For example, when the U.S. Federal Reserve instituted its second round of quantitative easing 2010, Bacon determined that equities, bonds and foreign exchange would be the beneficiaries. These days, with QE2 winding down, Greece still a problem and the developed markets running out of room to maneuver, Moore’s positions are said to be light across all funds, reflecting a pervasive uncertainty at the firm, an overall concern for the global financial markets, and a reluctance or refusal to get out ahead of the market and make a big bet on a market turn. No doubt Bacon is mindful that the money managers who lost the most in 2008 were those who were too early to declare the late year’s sell-off over.
Today, Bacon is responsible for roughly one-third of the total asset base, working closely with Richard Axilrod, his chief strategist, who has been with the firm since 1996. Bacon also sets the risk parameters for all the funds.
“He understands risk management intuitively better than others,” says Charles Krusen, chief executive of Krusen Capital Management, a registered investment adviser whose LionHedge Platform offers access to top-tier hedge fund managers. He explains that Bacon is not afraid to take a big swing if he has strong conviction, but stops himself out before staying wrong for too long, which is emotionally difficult.
So what happened in recent years? In 2008, Bacon did urge his portfolio managers to lower their risk. But he says that in retrospect, he should have forced them out completely. Although he was bearish on financials, he was initially hurt by the rescues of Bear Stearns, Fannie Mae and Freddie Mac, as well as restrictions on short-selling financials in general. “We went into September  slightly positive on the year and expected a rescue of Lehman as well,” he recounted in a letter. “We were unprepared for the bankruptcy and the U.S. authorities’ lack of contingency planning.”
Bacon’s macro portfolio managers made money, but the gains were more than offset by losing positions from his equity and emerging markets players. Bacon ended up paying bonuses to his profitable managers despite the losses.
The frustration continued the following year, as he lost money in the first four months, worried more about his counterparties and redeeming investors, calling the period “some of the most stressful, white-knuckled days of my trading career.”
Last year was even more troubling. Bacon started off cautiously and was up more than 2% in the first quarter. But in May, both Global Investments and Remington were down about 9.2%, their worst month in Moore’s history. At the time, Bacon was very concerned about the overindebtedness of the weaker member countries of Europe’s Economic and Monetary Union, pejoratively called the PIIGS—Portugal, Italy, Ireland, Greece and Spain—and foresaw a potential breakup of the euro.
As the year wore on, the economic disaster Bacon was anticipating never materialized, in part because of the Fed’s second round of quantitative easing. Through the summer of 2010, Bacon’s risk exposure was low, but he was able to shift gears enough to take advantage of the rally in the fixed-income markets to end the year in the black.
Louis Bacon won’t talk to the media, including AR for this article. You won’t find him speaking at conferences or touting a book on a publicity tour. And yet, despite his obsession with secrecy and remaining as opaque as hedge funds can be, Bacon can’t seem to stay out of the press for less-than-noteworthy reasons.
In 2010, for example, British regulators raided Moore’s London offices and arrested one of its traders, Julian Rifat, for allegedly engaging in illegal insider trading along with a number of others as part of an insider trading ring. At the time Moore said in a statement: “Moore is cooperating fully with the FSA ... The employee has been placed on administrative leave pending completion of the investigation.”
In April of that year, Moore agreed to pay $25 million to settle charges by the Commodity Futures Trading Commission that it tried to manipulate the settlement prices of platinum and palladium futures contracts on the Nymex. The CFTC also filed and settled charges that Moore failed to “diligently supervise” the handling of Moore Capital Management’s commodity interest business. The case caused barely a ripple among Moore investors. In a statement at the time, Moore said the individual involved in the infraction had left the firm in the fall of 2008. “Neither Moore Capital’s principals nor its current management were involved in any improper trading, and none have been accused of wrongdoing,” it said. “Moore Capital has cooperated fully with the CFTC throughout its investigation. We are committed to high standards of integrity in our business practices and have worked diligently to reach a settlement with the CFTC.”
On a personal level, Moore also became tabloid fodder in the Bahamas last year. In early 2010, the naked dead body of Bacon’s house manager was found in the Jacuzzi on Bacon’s Bahamas estate, one of many homes he owns. The individual, who lived on a houseboat docked at a marina on the estate, was said to have died of cardiac arrest.
Later last year, 10 armed plainclothes police officers entered Bacon’s home looking for lethal “ultrasonic weaponry,” according to the Bahamas’ Tribune. Bacon was not present at the time, but the police reportedly handcuffed and body-searched household staff for more than three hours, before confiscating a set of military-grade loudspeakers. Alas, the speakers were returned the same day and the police apologized after the incident.
It seems Bacon was in a war with neighbor Peter Nygård, the 67-year-old international fashion mogul, who called the police on the hedge fund manager. Bacon has frequently complained about loud music and other noise coming from Nygård’s property at all times of the day and night, according to the newspaper. The report said that the loudspeakers were used to send piercing, annoying sound waves to Nygård’s property. Another published account also noted that Nygård likes to sleep on his boat, not far from Bacon’s property. Bacon has put up the Bahamas property for sale.
Meanwhile, for the past year, Bacon has been locked in a battle with Colorado conservationists and utilities who want to build transmission lines. Bacon is trying to keep the project off his 171,400-acre Trinchera Ranch, which he bought in 2007 from Malcolm Forbes’s family and which includes Mount Blanca, the state’s third-highest peak.
A number of years ago, Bacon prevented development on his 435-acre Robins Island, off New York’s Long Island, and the 540-acre Cow Neck Farm in Southampton.
In keeping with the conservationist views of his ancestors, in June, Bacon gave $100,000 to Riverkeeper, a group trying to shut down the Indian Point nuclear power plant located in the Westchester County suburb north of New York City.
In yet another controversy involving Bacon, in May, the high court in the U.K. gave Bacon permission to force three U.S. websites—Wikipedia, DenverPost.com and WordPress—to reveal the names of people who have written commentary that he alleges is defamatory. Bacon was given the go-ahead to serve what is called a Norwich Pharmacal order (NPO) by email against the websites. However, legal experts told the Guardian newspaper the companies could ignore or refuse to comply with the orders.
These days, Bacon remains cautious, keeping a low risk exposure to the financial markets. He has acknowledged to people who know him that certain growth metrics might be indicating that the economy might be getting back on track, but that he would not become bullish until he sees at least two consecutive months of meaningful growth in the payroll employment numbers. That statement was made before the disappointing May employment report that sent markets tumbling.
Equity risk-taking has increased in the past year as the new U.S. equity team has ramped up. For example, at the end of the first quarter, Bacon raised his U.S. equity exposure to $5.7 billion from $4.5 billion in the fourth quarter and just $2.1 billion in June 2010. Only part of this increase stems from the buildup of his equity team.
Bacon’s two largest equity positions were drugmaker Novartis and Assured Guaranty, a provider of financial guaranty insurance. His biggest sector exposure was to financials (19.7%), followed closely by energy (17.4%). In fact, four of his six largest new positions at the end of the first quarter were energy and natural resources stocks.
Exchange-traded funds also generally play an important role in Moore’s portfolio, especially in Macro Managers. For example, in the first quarter, the firm closed out a large position in iShares, which tracks emerging markets, and much smaller positions in ETFs following financial stocks and technology stocks. During the quarter, Moore also took a new modest position in an ETF for the Hong Kong stock market.
Moore also hedged with puts on a number of stocks or ETFs. It is not uncommon for Moore to buy the common of an ETF or other stock, and then hedge with both calls and puts on the same security. In the first quarter alone, he did this with a number of ETFs, including the Amex Select SPDR-Financial and iShares FTSE/Xinhua China 25, which is a basket of 25 large stocks in China, as well as individual stocks such as Cephalon and Williams Companies.
Even more pressing than what’s in Moore’s portfolios is Bacon’s game plan. As billionaire hedge fund managers reach their mid-50s and with markets so tough and unforgiving, it is fair and prudent to wonder when they will personally wind down. Most observers concede it would be hard to imagine Global Investments and Remington surviving a Bacon retirement, whenever that occurs. But Macro Managers could thrive, even without Bacon around to set allocations. Says Brad Alford, chief investment officer of Atlanta-based investment management firm Alpha Capital Management, who has an investment with both Macro Managers and Remington: “Bacon is trying to build a firm that outlasts him.”
This enviable goal is expressed these days by most aging hedge fund managers. But while it is hard to make a case for investors to remain with the funds Bacon personally manages, he just might be able to pull it off with Macro Managers if he can continue to hold on to the dream team that runs the fund.
Bacon’s legacy fund: Will the $4.3 billion Macro Managers fund outdo the maestro?
When Trent May sought to allocate money to hedge funds on behalf of the Wyoming Retirement System for the first time, he eschewed what he calls “one-hit wonders”—managers who had maybe a couple of good years but no stellar long-term record. It was a game plan he also figured would reassure the retirement system’s board of directors, which had shied away from hedge funds.
May narrowed an initial list of 40 candidates to a group of five of the funds offered by the largest, most successful hedge fund firms—Moore Capital Management, Brevan Howard, Caxton Associates, BlueCrest Capital Management and Graham Capital Management—and gave each of them $30 million. “For us, risk controls and procedures are paramount,” says May, who was named Wyoming Retirement System’s first chief investment officer in 2009.
But it wasn’t Moore’s flagship May chose, but the Macro Managers fund, which is widely considered Louis Bacon’s legacy fund. May was drawn to the pool of 14 different investment teams who comprise the fund instead of depending on one person—Bacon. “We wanted to diversify our risk-taking pool rather than have a primary risk-taker,” May recalls. “It is like a who’s who or dream team of macro managers.”
As long as they are making money, Bacon lets the managers run largely autonomously, although an allocation committee he chairs does determine how much money each manager receives. At least once, Bacon regretted not being more forceful, admitting in a letter to investors he should have taken money back from some of the managers during the tumultuous markets of 2008, especially those involved in structured-trade and carry-trade types of positions.
From 1993 until 2009, Macro Managers was known as Moore Global Fixed Income Fund, reflecting its roots. However, until 2002, it was deemed to be a Bacon-centric fund, as Bacon himself was much more involved. Since then it has morphed into a macro fund, pulling in credit, commodities, relative value, as well as other strategies, and the name was changed to better reflect the fund’s diverse portfolio manager structure. From 2002 through 2005, assets under management surged to $4 billion from $1.8 billion as Bacon boosted the infrastructure, expanding the risk management, reporting and quantitative analysis team from about eight or nine individuals to about 22 to 24.
Today, Macro Managers has 14 strategy teams; most are run by three to four individuals. The fund has never suffered a down year, compounding at a 15% annualized clip through 2010 with very little correlation to the overall market. It offers quarterly liquidity with 60 days’ notice.
In general, Bacon does not want Macro Managers to get larger than $4.5 billion to $5 billion. It now has $4.3 billion.
The operation of Macro Managers has been shrouded in even more secrecy than the other Moore funds. But according to an offering document obtained by AR, allocation decisions are made monthly by the investment allocation committee, based on, among other things, manager performance, risk and correlation metrics, the macroeconomic environment and current market opportunities. The allocation does not typically change from month to month. “The fund was created not to be Louis dependent,” stresses a person familiar with the fund.
Macro Managers is said to have done well in agricultural commodities. But it’s not investing in industrial-related commodities, figuring growth is slowing around the world and soft landings are being engineered in Asia. Most of the teams are classified in an offering document as global opportunistic, while others include merger arbitrage, relative value, credit-/event-driven and commodities. Nine of the 14 teams joined the firm after 2006. Two of the teams are run by former top Goldman Sachs traders: David Jasper, a Latin American expert who joined Moore in January 2010 to run an emerging markets–focused portfolio after serving as a managing director and head of the emerging markets trading group in New York, and Garth Appelt, an emerging-markets specialist at Goldman Sachs, who joined Moore in 2010 to run an emerging markets portfolio.
Bacon also brought in luminaries from Morgan Stanley. One of them is Jens-Peter Stein, who joined Moore Europe Capital Management in January 2006 to run a global opportunistic portfolio, after spending more than five years with Morgan Stanley International, where the foreign exchange specialist served as, among other things, global head of the foreign-exchange trading and fixed-income macro trading group. Another is Erik Siegel, a credit specialist who runs a credit- and event-driven portfolio.
“He can afford anyone he wants,” says Brad Alford, chief investment officer of Alpha Capital Management, alluding to the 3% management fee and 25% performance fee charged by the firm’s main funds.
Each portfolio manager has customized prearranged trading and risk guidelines, according to the marketing document. Portfolios are constructed to reflect market views, given absolute and relative valuations prevailing in the market. Risk protocols are then monitored by Moore’s quantitative analysis and risk control group, which is charged with assessing and trying to limit downside risk.
Risk management at the fund level is overseen by the risk policy committee in consultation with Bacon. If the fund, for example, has a particular concentration because several teams have the same sentiment, the risk committee might recommend a hedge at the fund level or instruct individual managers not to increase their position or to reduce it. This sits well with investors. “[Louis] picked 14 great managers for me, and I get his expertise over the top,” says Trip Kuehne, founder of Dallas-based fund of funds Double Eagle Capital Management, which last year took an initial position in Macro Managers.
Moore spells out to its investors in great detail how it deals with drawdowns among its managers. For example, if the manager is 5% below the historical high-water mark, there is a formal discussion between the director of risk and the portfolio manager. The portfolio is reviewed in depth, and there is close scrutiny of trading actions. Should the portfolio drop 10% below the historical high-water mark, risk levels are capped. In addition, they two discuss exit strategies and, of course, closely scrutinize trading. If a manager is down 15%, he is trading only for an exit, unless management decides otherwise. “For us, risk controls and procedures are paramount,” stresses May.