Caxton Associates just posted its best year since Andrew Law took the helm of the macro giant from retiring founder Bruce Kovner at the end of 2011.
Caxton Global Investment, the firm’s flagship fund, finished the year up 42.1 percent, after gaining 4.4 percent in December, according to an investor.
The Caxton Macro Fund, which Law himself trades, surged 62 percent last year, according to the investor.
Law declined to comment.
According to the investor, recent performance gains came from reflation as well as environmental, social, and governance themes in commodities, rates, and equities.
Law joined Caxton from Goldman Sachs in 2003 to build out its London office’s macro trading operation. He became chief investment officer in 2008, the year of the global financial crisis.
In a letter sent to clients in early December and obtained by Institutional Investor, Caxton said it is planning to “cap” the assets of the Global fund probably sometime “over the coming months.” It said the Caxton Macro Fund will remain open to inflows.
Law also said in the letter that the firm’s Dynamis strategy “is likely to shortly open to limited investment.” According to a July 2019 letter earlier obtained by II, Dynamis is mostly a fixed-income fund with a special emphasis on the short end of the curve and the volatility market. Caxton also said it planned to launch its new Quantitative Climate strategy to external investors this month.
The Advantage strategy, however, “remains hard closed.” The multi-asset class fund with a heavy focus on global fixed income uses a combination of discretionary and systematic strategies “with a time horizon spanning minutes to weeks.”
Discussing 2020’s performance in the recent December letter, Law stressed, “the broad and proactive Portfolio Management Teams changes we enacted in 2017 and 2018 manifested in strong, diversified performance again this year-to-date.”
In the 2019 letter Law stressed ESG had been “a leading topic of due diligence inquiry” for some time.
“ESG is now [center] stage for us in active investment decision making in several areas as the impact of climate change becomes accepted by a large majority,” he added then. “I believe that environmental concerns specifically will be a dominant factor for investors and consumers alike.”
Looking ahead, Law thinks that pent-up demand and the resumption of unrestricted lifestyles post-pandemic, especially after there is herd immunity in developed markets, would ultimately lead to higher inflation, which will have “profound implications for asset allocations.”
“Market expressions of reflation are likely to be numerous across all asset classes, albeit with varied timing due to policy,” Law stated in the letter. “Many of the expressions have been out of favor for the best part of a decade. Most market participants, and consequently their portfolios, are heavily conditioned from decades of disinflation or low inflation.”
He added this secular change in the inflation outlook is occurring while there is a growing appreciation for and acceptance of ESG risk. Law stressed portfolio diversification will be critical.
