This content is from: Portfolio

The Morning Brief: Caxton Cuts Fees — Barely

Caxton Associates is the latest among a growing number of struggling hedge fund firms to cut the investment fees it charges. However, the reductions are very small. According to Reuters, the New York macro hedge fund firm headed by Andrew Law told clients in a letter that it will charge a 2.5 percent management fee and 27.5 percent performance fee for investments of up to $100 million. The management fee then falls, on a sliding scale, to 2.2 percent for investments exceeding $500 million. It is also offering a new share class that will require investors to lock up their money for three years. Those investors will pay just a 2 percent management fee. The new fees take effect January 1, 2017.

In 2012 Caxton cuts its fees from 3 percent of assets and 30 percent of performance to 2.6 percent and 27.5 percent. Caxton, founded by Bruce Kovner in 1983, manages $7.8 billion. Its flagship fund, Caxton Global Investment, is down 2.6 percent this year through September 2. It posted just a 3.5 percent gain last year after losing 1.3 percent in 2014. In recent months several other high-profile hedge fund firms have announced they are cutting their fees, including Greenwich, Connecticut-based Tudor Investment Corp. and New York-based Och-Ziff Capital Management.

“Whilst it is entirely appropriate that the rewards for great performance continue to be exactly that, it is important to recognize that compensation across the entire financial services industry has moved lower post-global financial crisis,” Law reportedly told investors in a letter announcing the fee cuts, according to Reuters.

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Preqin said the average hedge fund returned 0.97 percent in August, bringing year-to-date gains to 4.67 percent. This was the sixth consecutive month of positive performance, the longest consecutive profitable streak of monthly gains for hedge funds since the industry posted 12 consecutive months of gains from June 2012 through May 2013. All major strategies made money last month, led by equity strategies, which gained 1.31 in August, and credit funds, up 0.91 percent. Meanwhile, emerging market funds are now up 8.44 percent for the year-to-date, according to the London-based alternative investment data firm.

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Shares of Herbalife jumped 3.9 percent, to close at $62.16, after billionaire Carl Icahn told the audience at Delivering Alpha on Tuesday evening he can raise his stake in the stock to 35 percent from a current 21 percent and asked for permission from the Federal Trade Commission to lift that stake to 50 percent. Of course, William Ackman’s Pershing Square Capital Management has a high-profile short position in the multi-level marketer of nutrition and health-related products. On August 31, Icahn bought 306,846 shares for $60.39 per share.

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Shares of hedge fund favorite Apple surged 3.6 percent to $111.83 amid optimism over the prospects for the consumer electronics giant’s latest version of the iPhone. This is just shy of its highest closing price this year. At the end of the second quarter, Apple was the fourth most popular stock among hedge funds, with 139 holding a position in the shares. It was the largest U.S. long equity holding of Boston-based Adage Capital Management and New York-based Greenlight Capital and the second-largest holding of New York-based AQR Capital Management.

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