Louis Bacon: Macro, Macro Man

For years, Louis Bacon earned the best returns in macro investing with the least volatility. Can he return to glory, even as titans like George Soros and Julian Robertson flee the scene?

Louis Moore Bacon craves order, discipline, routine. He doesn’t like distractions.

The founder of the Moore Capital Management hedge fund group, Bacon operates from homes and offices around the world. Any given day may find him at the Boltons, the swank London address where he lives with his family, at the firm’s headquarters in midtown Manhattan or ensconced in one of his numerous other plush residences—in Colorado, Lyford Cay in the Bahamas or Robins Island, the 455-acre retreat off Long Island that he purchased for $11 million six years ago.

When he travels among these locations everything must be laid out just so in advance. The day before he embarks, a Moore Capital employee is dispatched to Bacon’s destination to ensure that whatever he’s scrutinizing—from displays on his computer screens to hard copies of any files or documents he has been studying—is arranged in an exact replica at the desk he will be using next.

“Everything at Moore is set up to serve the king,” explains one Wall Street trader who knows Bacon well.

Today Bacon reigns over not only Moore Capital but over the most visible, most high-octane area of money management—macro investing. He gained the throne by default, and at a time when the future of the realm is increasingly in doubt. After sharp reversals, Julian Robertson in March shut down Tiger Management; in April it was George Soros’ turn to slash the size and scope of his funds. With $9.4 billion under management—$7.6 billion in macro partnerships—Bacon is by far the biggest of the daredevil managers who are still placing big directional bets on stocks, bonds, currencies and commodities at a time when such bold trading has come under withering scrutiny. But he, too, is struggling this year, and many skeptics wonder whether the days are numbered for this high-wire investing style.

Like his bigger, better-known rivals, Bacon has racked up a stunning long-term record. His flagship fund, Moore Global Investments—at $6 billion by far his largest—has returned 31 percent annually after fees since its inception in 1990. Last year the fund was up 26 percent.

But Bacon’s hallmark has been consistency: He delivered these returns with low volatility and relatively little correlation to the stock market. From 1995 through 1999, his annual returns ranged from 23 percent to 32 percent. By contrast, Soros’ flagship Quantum Fund zigzagged between 39 percent and –1.5 percent, while Robertson’s Jaguar Fund whipsawed from 57.2 percent to –18.1 percent. Moore’s funds recorded a Sharpe ratio—which measures risk-adjusted investment returns (the higher the number, the better)—of 1.77, compared with 0.69 for Quantum and 0.45 for Jaguar over those five years. The Standard & Poor’s 500 index logged a 1.54.

“If you look at Louis’s long-term track record, there is probably no trader alive who has better risk control on an asset base his size,” says Paul Tudor Jones, a close friend of Bacon’s who runs Tudor Investment Corp. “He wrote the book on capital preservation.”

So much for the past.

Bacon, like other macro specialists, got caught in the cold winds blowing through the markets this year. Robertson defiantly stuck to value investing; when he folded his funds at the end of March, he was down 8 percent for the year. Soros came late to tech issues and couldn’t get out quickly enough when the market cracked; by late April, when his chief trader, Stanley Druckenmiller, stepped aside, Quantum was off 22 percent.

Bacon, whose flagship fund was down 7 percent through May, got hit on several fronts. A futures trader by training, Bacon, like Druckenmiller, loaded up on stocks last fall to boost a sagging performance—he was up just 6.8 percent through September. By year-end he was up 26 percent, but 90 percent of his profits in 1999 came from stocks, compared with about 30 percent in recent years.

Convinced that the strong U.S. economy would lead to higher inflation, Bacon in the first quarter shorted bonds and interest-rate-sensitive stocks while staying long in tech stocks and some foreign equities. He also shorted the dollar to hedge against a stock market rout. In March, sensing bad news, he started selling but couldn’t get out of stocks fast enough, even as the dollar and bonds rose against him.

“We are still licking our wounds and pondering our shortcomings,” Bacon wrote his investors in late May, when he had slashed stocks to 10 percent of his portfolio. “Losing on four sides of a trade—the dollar, bonds, the technology sector and the ‘old economy’ stocks—while keeping the original thesis more or less intact, leaves one humbled and scratching one’s head.” Unlike Robertson and Soros, who are in their late 60s, Bacon, who turns 44 this month, has no intention of throwing in the towel. But he faces a tough challenge regilding his reputation and convincing investors, in the wake of this year’s highprofile flops, that macro trading still has a future.

Leveraging up and chasing any investment opportunity anywhere in the world—for a macro trader to be guilty of style drift, he would have to leave the planet—these swashbuckling bettors captured headlines and investors’ imaginations and their funds. The most notorious exploit was Soros’ $10 billion bet against the British pound, which earned him the sobriquet of the Man Who Broke the Bank of England. Always volatile, macro trading became increasingly difficult as more players crowded into the arena. A variety of factors, including the development of a single European currency, have eliminated many of the massive global bond and currency trades by which macro traders earned their handsome livings. Since the 1998 blowup of Long-Term Capital Management—technically an arbitrage operation that made huge macro bets—credit for macro traders has been tight.

<="" p="">But investor sentiment toward macro has become as volatile as many funds’ performance. Bacon, whose hyperactive investing style can make a day trader look relaxed, was nimble enough to keep his losses in check. Yet the extent to which he allowed one market—U.S. equities—to dominate returns disturbs some investors. “We don’t invest with Moore for this sort of rock and roll,” snarls one frustrated manager of a fund-offunds.

Sensitive to such concerns, Bacon, who declined to be interviewed for this article, took pains in a recent letter to shareholders to distinguish Moore Capital’s practices from those of the fallen funds. Moore has a high percentage of its capital locked up; since 1996 investors have had to sign on for three-year terms to prevent the kind of withdrawals of hot money that sent Tiger into a death spiral. Moore’s leverage—and assets—are at levels half those of Robertson and Soros at their peaks.

Though Bacon keeps giving money back to investors—$1.5 billion in 1999, and $4 billion over his firm’s lifetime—to prevent out-ofcontrol growth, some are still troubled by the size of Moore’s assets and Bacon’s recent efforts to diversify away from the firm’s original macro focus.

A number of funds-of-funds and European investors say that they have recently been considering whether to partially or completely reduce their exposure to Moore Capital. “Louis is the only macro manager we’ve got left, and so far that has proved to be the right decision,” says one longtime investor who is paring his stake. “But going forward, if his assets don’t decline, we may withdraw in full. We don’t want to stick around for the last penny of profits.”

Bacon directly oversees close to $8 billion of his funds’ investments, but he has hired niche market specialists, who have helped him to increase the reach of Moore’s macro funds into such areas as venture capital, Japanese distressed securities and emerging markets. Some of these specialists have been encouraged to market their own funds under the Moore umbrella. While this move should enable Bacon to leverage off the Moore name and institutionalize the brand, he runs the risk of overextending himself.

“The danger is, does the firm’s size transform Moore into just another fund-of-funds?” asks one observer of the hedge fund world. “Will Louis be able to sustain his returns with that kind of bulk?”

FOR A MAN OF HIS INFLUENCE AND WEALTH—perhaps $1 billion of his net worth is said to be tied up in his own hedge funds—Bacon maintains a remarkably low profile. No gala charity benefits à la Paul Tudor Jones, whose annual fundraisers for the Robin Hood Foundation regularly grace newspapers’ society pages; no Sorosian campaigns to urge Eastern European political reforms or the legalization of marijuana for medicinal purposes.

Bacon’s incessant trading generates huge commissions, but not many on Wall Street know what he looks like. (Six feet tall, he sports a beard that comes and goes at whim.)As with life, so with trading: Few know what Bacon is doing at any given time, and he prefers it that way. At a time when hedge fund performance data is freely available on the Internet, Bacon tries to keep his results secret and is even wary of having historical returns for his funds published.

In 1993, when Forbes was working on a story about the outsize profits made by hedge fund managers, Bacon called up, pleading that his firm’s results not be included. He went so far as to messenger over a photo of his children, attaching a note arguing that the publicity could prove harmful to them.

More recently, Bacon and his staff at Moore retracted an invitation for IIto interview officials at the firm and ultimately declined to comment for this story. “Publicity in no way enhances our ability to deliver for investors or to build our business, whatever the short-term fix to the ego,” a spokeswoman for the firm wrote in a statement.

Bacon is no recluse. A charming, engaging conversationalist, according to friends, Bacon is a serious outdoorsman who loves to hunt and fish; an avid athlete, he delights in snowmobiling, skiing and free diving. His charitable foundation is devoted to conservation causes. “But he has made a decision not to be a public figure,” says a former Moore employee. “He’s just not a flamboyant personality. Soros and Robertson enjoy an audience. But Louis is a private person who likes his space.”

This reticence extends to his investors. Bacon’s letters can be cryptic and circumspect about performance data, though he will ruminate on economic and political developments around the world. (A recent theme has been the U.S. current-account deficit and the threat it poses to the dollar.) “Transparency on positions and thought processes is not something that is healthy to share with competitors, from either the investor or marketparticipant standpoint,” Bacon summed up in a letter to investors.

To be sure, as much as he guards his own secrets, Bacon has been known to snoop into those of his rivals, taking stakes in competing hedge funds. Some market players dubbed him the Predator for taking advantage of other traders’ weaknesses.

Bacon grew up in Raleigh, North Carolina, and counts among his ancestors Nathaniel Bacon, a rogue colonist who, in 1676, launched an unauthorized attack on Indians that briefly led to his controlling most of Virginia. Bacon’s father, Zachary Bacon Jr., ran the North Carolina real estate operations of both Prudential and later Merrill Lynch & Co. Bacon’s mother died in 1983. When his father eventually remarried, it was to the sister of a man who was fast becoming a Wall Street legend: Julian Robertson.

Bacon is the middle of three sons. His brothers, Zachary III and Bart, graduated from local public schools, but Louis, in his junior year, ventured out of town to Alexandria, Virginia, enrolling in preppy Episcopal High School, by coincidence Robertson’s alma mater. Students at Episcopal were expected to work hard and had to sit in study hall during free periods and evenings. Only in the afternoon did they get a few hours outdoors, to play football or other sports. Bacon didn’t seem to mind. “One afternoon I passed through study hall, and there was Louis, grinding away,” recalls Lee Ainslie Jr., the former Episcopal headmaster and father of Lee Ainslie III, manager of the $4.5 billion Maverick Capital hedge funds. “Most other boys would have been happy to be outdoors playing.”

For college, Bacon traveled north to Middlebury College, where he majored in American literature. A favorite professor, Horace Beck, says he saw no signs of the budding financial genius. “I tried to get him interested in folklore,” he recalls. “But really, I had no idea what he was going to do.”

An aficionado of Ernest Hemingway and Nathaniel Hawthorne, Bacon cultivated his love of the outdoors in the bucolic surroundings of Vermont. “Southerners at Middlebury stuck out like sore thumbs,” recalls classmate Christopher Brady, who heads money management and advisory firm Chart Group and is the son of former Treasury secretary Nicholas Brady. “He hunted a lot, skiied incessantly and studied.”

Still, there were some early signs of the future financier: During the summers following his sophomore and junior years, Bacon worked as a clerk for New York Stock Exchange specialist Walter N. Frank & Co. The enterprising Bacon met Frank after working on his deep-sea charter fishing boat off Montauk, Long Island, during the summer of 1976.

From college, Bacon headed to Wall Street, landing a job as a clerk on the New York Coffee, Cocoa, and Sugar exchanges. “A lot of the great traders on Wall Street are from the South, and many got their start in commodities,” explains Brady.

An early influence was Paul Tudor Jones, who was sharing an apartment with Charles Johnson, a former roommate of Zack Bacon’s at the University of North Carolina. Jones, who had started out as a cotton trader, was then working as a commodities broker with E.F. Hutton.

Bacon soon headed off to get his MBA at Columbia University, where he used his student loan as capital to continue to trade. To his chagrin, he lost it all—and had to work odd jobs to make up the difference.

“From this experience, he learned how to handle risk,” explains Arpad Busson, who runs London-based ElM Group, a firm specializing in alternative asset management and fundraising and whose clients have had money with Bacon since 1990.

Bacon landed at Shearson Lehman Hutton in 1983 as a futures broker, trading on behalf of some of the biggest names in the hedge fund world. For a 27-year-old, Bacon deployed a powerful Rolodex. Jones and brother Zack, who deployed landed at Soros Fund Management as head trader, threw plenty of business Bacon’s way. He quickly became a top commission producer. “Louis was very fortunate to be right in the middle of that network,” notes Charles Stockley, president of Stockley Asset Management, a futures trading firm, and a childhood friend of Jones’s. “You can’t say that his career is a story of someone starting at the bottom and clawing his way up. But he took the ball and ran with it, and ultimately he surpassed them all.”

Bacon’s gilt-edged client list had another advantage, in addition to the hefty commissions: By trading on behalf of Soros and Jones, Bacon learned their investing styles.

BY 1986 BACON HAD ACQUIRED enough of a reputation to start managing other peoples’ money. The following year, while still at Shearson, he set up a small fund called Remington Investment Strategies (it remains part of the Moore Capital family). Right off he hit a home run. He correctly anticipated the stock market crash, going short S&P futures and then shifting to a long position just as the market bottomed.

By the end of the decade, Bacon had established a strong track record, and he decided to move to a bigger stage. When he set up Moore Capital in 1989 (the firm bears his mother’s maiden name), he already had more than $100 million under management. He quickly raised $1.8 million more for an offshore fund, Moore Global Investments, which is today Bacon’s biggest portfolio. Much of the sum came from Antoine Bernheim, whose Dome Capital Management invests in hedge funds on behalf of European investors. “The key thing about Louis is his ability to analyze and process information quickly, while controlling risk,” enthuses Bernheim. “That is the essence of a talented hedge fund manager.”

The early investors were quickly rewarded: That first year, Moore Global was up 86 percent, thanks largely to Bacon’s decision to short the Nikkei index just before the Japanese markets collapsed. He also anticipated Saddam Hussein’s invasion of Kuwait and went short stocks and long oil.

As Bacon set out to raise more money, his task was made easier by his friendship with Jones, who had decided to close his funds to new money. In a letter to investors, Jones recommended they invest spare capital with Moore. Jones also introduced Bacon to Busson, who had helped him raise money in Europe. By the end of 1990, Bacon had $200 million under management and was up a healthy 29 percent.

Bacon soon began refining his trading style. Though he studies charts and diagrams, he relies on an obsessive attention to detail—and ultimately instinct. “He is like an animal in his ability to sense the market,” says one longtime investor.

Like any good macro trader, Bacon strives to identify long-running trends, or investment themes, such as euro convergence or structural interest rate moves. But unlike many others, Bacon can have an itchy trigger finger, and he will sometimes trade in and out and around his positions, even if they’re moving in the predicted direction. “If Louis thinks something is going from 70 to 100, he’ll trade in and out 15 times before it gets there, where we would get in and hang on as it went up and down,” says one trader at a rival hedge fund.

Even today, with some 230 employees, Bacon keeps a firm hand on the tiller. “Very few people at the firm are allowed to take serious risk,” says one source. “There’s a lot of people there, but they are mostly in support, research or administrative positions.”

Still, Bacon is capable of holding positions when he thinks they have potential: A source close to Moore notes that the firm maintained a stake in European bonds, particularly Swedish and Italian securities, from 1995 to 1999. But typically, if an investment seems to be moving against him, Bacon will get out quickly.

“If a stock goes from 100 to 90, an investor who looks at fundamentals will think maybe it’s a better buy,” explains one source. “But with Louis, he will figure he must have been wrong about something and get out.” Contrast that, say, with Robertson, who, even after shutting down his firm, was doggedly holding on to massive positions in such stocks as US Airways Group and United Asset Management Corp.

“The difference between Louis and Julian is, Julian sees the mountain from afar and doesn’t worry about the valley. Louis has a long-term macroeconomic vision on every position, but he won’t let that stand in the way of making money over the next five minutes,” says one former employee.

Bacon’s risk habits were formed in the futures arena. Interestingly, many of the macro funds that have disbanded or scaled back following losses—Steinhardt Partners, Odyssey Partners, Soros Fund Management and Tiger Management—were led by stock pickers. Meanwhile, most of the surviving macro players—Bacon, Jones, Kovner and Trout—come from the futures business. “The only people who survive in the futures world are those who understand and can manage risk,” explains hedge fund consultant Hunt Taylor. “That’s because the leverage is so high.”

Agreed Bacon in a recent investor letter: “Those traders with a futures background are more ‘sensitive’ to market action, whereas value-based equity traders are trained to react less to the market and focus much more on their assessment of a company’s or situation’s viability.”

Bacon has developed a reputation for not betting the ranch on any one trade. But when he sees a surefire opportunity, he plows in. Such was the case in 1993, when he and other macro traders—Soros, Steinhardt, Robertson and Leon Cooperman of Omega Advisors and just about every Wall Street proprietary trading desk—jumped on a secular rate decline and went long global bonds. With an eye toward diversifying, Moore launched a global fixed-income fund, as well as an emerging-markets fund. (The moves also insulated his main macro funds from the volatility of these smaller operations.) Bacon also began for the first time to dabble in stocks. For the year, Moore soared to a 53 percent gain.

Bacon, and most everyone else, paid dearly the following year, after the Federal Reserve Board’s decision to hike short-term interest rates in February triggered a historic crash in the bond market. Emerging markets swooned, and stocks also plunged. That month alone Bacon’s funds slumped by more than 7 percent.

As if the market turmoil wasn’t enough, Bacon was soon hit with another problem. James Kelly, a colleague of Bacon’s since his Shearson days and more recently Moore’s president, quit following a rancorous dispute. Kelly had set up an internal clearing operation to handle Bacon’s trades and wanted to offer that expertise to other hedge funds. When Bacon refused, Kelly announced he would leave to start his own back-office management company. (James Capra, a former proprietary trader of government bonds at Lehman Brothers and a senior trader at Moore, eventually joined Kelly). The distraction took its toll: Bacon stumbled through the year, ending 1994 down nearly 14 percent, his first loss as a professional manager.

Bacon set to shoring up his shop, building the core of his current management team through some astute hires. He brought in Elaine Crocker, the former senior vice president for trader administration and development at Commodities Corp., to replace Kelly as president. “It was a real coup for Louis to hire her,” says Busson. “She’s great at managing people. She’s like a coach to these boys, helping them stay balanced when they make or lose money.” Says another source familiar with the firm: “She keeps Louis from getting distracted. If it’s not related to the markets, it’s off his radar screen.” Other hires included Kevin Shannon, the former chief financial officer of a Lehman derivatives subsidiary and Argonaut Capital Management, and Richard Bookstaber, former head of risk management at Salomon Brothers.

Bacon also took advantage of 1994’s carnage to recruit traders. Most notably he tapped Stanley Shopkorn, the onetime vice chairman and head of equities at Salomon Brothers, who had gone on to launch a hedge fund, Ethos Capital Management. Shopkorn was badly bloodied when his hedge fund lost about 30 percent and many investors pulled their capital out. Bacon also recruited Barry Bausano, who had been a macro trader at Steinhardt Partners, and Richard Axilrod, a U.S. fixed-income trader whose hedge fund, Athena, also shut down. (Bausano has since launched his own hedge fund.)

With the new team in place, Bacon began posting steady returns above 20 percent. Like other hedge fund operators, Bacon became convinced that he should diversify his franchise, leveraging off his success and the talented traders he had recruited by launching new products. He was already moving in this direction: The global fixed-income fund, which today has $1.1 billion under management, was launched in 1993 and has had average annual returns of 21 percent; and his emergingmarkets fund of the same vintage is up to $200 million, with an average annual return of 16 percent.

But Bacon wanted more and turned to the man he felt he could trust most to oversee the new activities, his brother Zack. “He’s his deal maker and consigliere,” explains Brady.

Zack was available largely because his own efforts at running a hedge fund—called the Bacon Fund, it launched in 1985—had come up short. At its peak, in early 1995, Zack had $125 million under management, a chunk of which came from Louis.

Then Zack’s performance nose-dived. Over the next three years, he lost 13.4 percent, 6.5 percent and 6.9 percent, respectively. By 1998, down to just $20 million, he was happy to go to work for his more successful brother. “If Zack’s performance had been better, I don’t think he would have done it,” says a friend of his.

Under Zack’s direction Moore has been rolling our alternative products. The firm has $500 million in venture capital funds, including $220 million raised earlier this year. Moore is now raising a fund to invest in Japanese distressed securities, to be managed by Victor Khosla, a former trader at vulture investing giant Cerberus Capital Management, who joined Moore last year.

Perhaps the most creative new product involves a collaboration with private equity firm and insurance experts Capital Z to form Max Re, a Bermuda reinsurance company. The venture is starring off with $511 million in equity—including $100 million from Louis Bacon personally. What makes Max Re different from other reinsurance start-ups is that as much as 40 percent of its capital will be allocated to alternative investments, including Moore’s hedge funds. “It is a rather unique product,” says Robert Garofalo, an analyst at A.M. Best Co.

Launching sector funds certainly helps Bacon attract talented traders for his macro funds who also want the opportunity to manage their own portfolios. Many of his rivals—including Jones and Kovner—have set up similar funds for this reason (Institutional Investor, September 1999). With Bacon controlling all of Moore’s equity (although he does offer profit participations), this is a means of incentivizing employees.

The idea of building a broadly diversified empire and a lasting brand has its appeal, but particularly after the performance woes of macro funds this year, some of Bacon’s investors are growing worried that he’ll be distracted by the multitude of new products. “It’s definitely a yellow, if not a red, flag when a money manager spins our so many new funds in such a short amount of time,” says one longtime Moore investor.

In his year-end letter to investors, Bacon hastened to assure them the situation was under control. “The demands on my time should not increase, as other investment professionals or management groups independent of Moore—though selected and sponsored by us—make investment decisions that fall within their respective disciplines,” he wrote.

Bacon has been increasingly willing to delegate responsibility for specific sector investments, once he has set the appropriate asset allocation. When Bacon recruited Shopkorn in January 1996, for example, it was just in time to take advantage of the growth-stock bonanza. But Shopkorn’s equity positions accounted for no more than a third of Moore’s macro profits—until last fall. Subsequently, Shopkorn’s bets dominated Moore’s performance to a degree that is disconcerting to some investors.

By the end of the third quarter of 1999, Bacon’s returns were lagging, and his offshore fund was up a mere 6.8 percent. Bacon unleashed Shopkorn. Quarterly Securities and Exchange Commission filings for two entities, Moore Capital Management and Moore Capital Advisors, list equity holdings for the fourth quarter of $6.3 billion, nearly double the amount disclosed at the end of the prior quarter.

In November Bacon made a 13G filing that disclosed a 7 percent stake in eToys, an online retailer. Moore had indirectly accumulated most of its stake in the company before its IPO in May 1999 at $20 a share. The stock hit a high of $84.25 in October, valuing Moore’s stake at $702 million. Moore reduced its holding to 4.8 percent in December, as the stock traded down into the 20s. But that still left the firm seriously exposed to a slide this year, as eToys faced a cash squeeze that took its shares down to a recent 5 1/8.

Moore’s equity holdings boosted returns for November and December, when its offshore fund made 19 points of its 26 percent return for the year. Overall, equity positions accounted for 90 percent of Moore’s profits in 1999.

Bacon was initially reluctant to bet so heavily on the stock market but agreed at the urging of Shopkorn, who reportedly boasted of having changed Bacon’s mind in a January speech at a conference sponsored by Morgan Stanley Dean Witter’s prime brokerage group. “Shopkorn said he was bullish on stocks since early 1999, but Bacon is such a cynic that it was hard at first to get him to believe,” recalls a conference participant who says he heard Shopkorn speak. Shopkorn declines to comment. At Shopkorn’s urging, Bacon also made money shorting the Treasury market—but didn’t bet much on this trade until year-end, because of liquidity concerns relating to Y2K.

Even before the stock market correction this year, Bacon was unhappy about the extent to which his portfolios were exposed to equities. “It was an unsatisfactory year despite our adequate performance,” he wrote investors in the 1999 year-end report, dated February 16, 2000. Aside from the bond trade, he bet the wrong way on the euro versus the dollar. He was concerned about the rising U.S. trade deficit and anticipated a drop in stock prices.

By mid-March of this year, a worried Bacon ordered Shopkorn to cut Moore’s equity exposure; indeed, filings with the SEC show that positions were down to $4.7 billion at the end of the first quarter. But he was unable to do so fast enough. As the Nasdaq plummeted in April, Moore Global took a hit, racking up a loss of 5.8 percent.

Soon after Bacon slashed his equity exposure, Shopkorn announced his retirement. The spin both Shopkorn and Bacon put on the news was that Shopkorn’s employment contract was up, and he wanted to spend time with his family. But some investors scoff at this interpretation. Shopkorn is a bull market investor, and they think he became frustrated that Bacon no longer wanted to play the stock market. Other investors, worried about Shopkorn’s high tolerance for risk—and the blowup of his hedge fund in 1994—say they are just as happy he is gone. “I worried more when he joined than I did when he left,” shrugs one.

BACON FACES A DAUNTING CHALLENGE IN fighting his way out of his current slump. But it’s not just Moore Capital’s shareholders who have a stake in seeing whether he can resume his winning ways. The troubles at Soros and Tiger have raised the question of whether the gung ho macro style they favored is still attractive to investors.

If Bacon is nervous, it’s not evident: His funds are still accepting new capital. He insists that despite its size, Moore Capital remains firmly in his grasp.

And he remains a true believer in the virtues of macro investing. In one of his recent letters to investors, he expounded on the opportunities in the sector. “If macro means ‘interest rates,’ I will point out that we have had one of the largest 12-month movements in interest rates on record in the last year. If macro means ‘currency,’ the extent of the movement of the yen and the deutsche mark is normal for the first nine months of the year. If macro means ‘commodities,’ then a doubling of oil prices in six months seems rather eventful. If macro means ‘stock indices,’ well there’s no need to chronicle those movements,” wrote Bacon. “I can assure you, despite the lack of performance on my part and some others in the industry, there have been great opportunities. . . . At the end of the day, the overall viability of the ... [macro] funds continues to rest on my abilities to call the markets and manage risk.”

Still, as they wait for Bacon to start calling the market right again, his investors are getting antsy. “This is a very hot topic. The litmus test will be if there’s a major macro move and he doesn’t capitalize on it,” says a source who manages money for a wealthy European family. “He no longer has the excuse that other macro investors are getting in his way.”