Bruce Kovner steps down from Caxton

What a career. This market wizard went from driving a NYC taxi to making a few small trades in Soybeans to being worth 4.5 billion today. What a career.

http://dealbook.nytimes.com/2011/09/13/bruce-kovner-founder-of-caxton-to-step-down/?partner=rss

September 13, 2011, 1:12 pm Hedge Funds

Bruce Kovner, Founder of Caxton, to Step Down
By AZAM AHMED

Bruce Kovner of Caxton AssociatesNicole Bengiveno/The New York TimesBruce Kovner is retiring after leading Caxton Associates for 28 years.


Bruce Kovner, a founder of the $10 billion hedge fund Caxton Associates, told investors on Tuesday that he would retire as the company’s chairman at the end of the year and hand off the reins to his chief investment officer.

The succession — largely expected but still rare for the hedge fund industry — has been years in the making. In 2008, Mr. Kovner named Andrew Law, who joined the firm from Goldman Sachs in 2003, as the head of investing. The promotion essentially paved the way for Mr. Law, who will become the firm’s chairman in 2012.

In addition, Mr. Kovner will transition from a majority to a minority owner of the firm by ceding a portion of the business to other Caxton partners, according to a person with knowledge of the matter.

Mr. Kovner, 66, has amassed a fortune at the helm of his hedge fund, which he helped start in 1983, in the early days of the industry. He is part of a generation of hedge fund founders approaching retirement, causing their firms to grapple with whether they can outlive their founders.

Last year, for example, investors fled Shumway Capital Partners after its leader, Chris Shumway, announced that he was handing over investment decisions, forcing the firm to close.

The fragility of the business, in some respects, lies in its origins. Hedge funds are almost always associated with one main figure. Pershing Square Capital Management is reliant on the investment persona of its colorful chief, William A. Ackman. SAC Capital, a $14 billion trading colossus, bears the initials of its founder, Steven A. Cohen.

“Most firms are identified with a particular individual, and it takes a great deal of strategic planning, spanning a number of years, to get the investors prepared for any succession,” said Marco Masotti, a partner at the law firm of Paul, Weiss, Rifkind Wharton & Garrison. “A lot of the managers are getting to a certain age when they are starting to think about succession plans. Not because they want to leave but because their business is maturing.”

Handing off the business to the next generation is also driven by economics. Founders want a way to cash out on what they have built, and one of the few ways to do that is to sell ownership stakes to partners.

For Mr. Kovner, the decision was most likely an effort to see his firm carry into a fourth decade and a way to capitalize on its success.

In an interview, Mr. Law, 45, said, “It’s better to have half of something than all of nothing.”

Some investors, like George Soros and Stanley Druckenmiller, have decided that rather than weather the whims of outside investors, they would prefer to manage their own money as a family office, a designation that allows them to largely avoid regulation.

Like Mr. Soros, Mr. Kovner has grown extremely wealthy betting on global market trends using stocks, currencies and commodities, among other things. He bought the former International Center for Photography on Fifth Avenue and 94th street for $17 million and spent another $10 million renovating it. An avid collector of rare books, Mr. Kovner named his hedge fund after the first printer of English-language books. Forbes magazine estimated Mr. Kovner’s wealth to be in excess of $4.5 billion.

Unlike Mr. Soros, a generous donor to liberal causes, Mr. Kovner is a conservative supporter who counts among his associates former President George W. Bush and former Vice President Dick Cheney. He is a trustee of the American Enterprise Institute, a conservative research organization, and has given more than $100,000 to Republican causes and candidates since 2010.

An accomplished pianist, Mr. Kovner briefly attended the Juilliard School and is now chairman of its board and a major donor.

The news of Mr. Kovner’s stepping down was reported Tuesday afternoon by Bloomberg News.

Since its founding in 1983, Caxton has returned money to investors at an average annual rate of 21 percent, one of the best rates in the industry. In 2008, the year Mr. Law was named chief investment officer, he produced a 13 percent return for Caxton investors. That performance, amid the onset of the financial crisis, shone brightly compared with an average drop of 19 percent for hedge funds and a fall of 37 percent in the Standard & Poor’s 500-stock index.

A native of Britain, Mr. Law graduated from Sheffield University in 1987 before starting his career as an investor. A few years later, he joined, and eventually ran, the proprietary desk at Chemical Bank. Goldman Sachs hired him in 1996, and five years later, Mr. Law ran the proprietary group that traded fixed income, commodities and currencies from London.

When he decided to leave Goldman in 2002, Mr. Law said, he began to study different hedge funds. A friend set up a meeting with Mr. Kovner. On a snowy winter’s day nearly nine years ago, the two met for breakfast in Mr. Kovner’s old home near the Metropolitan Museum of Art. It quickly became clear that the two men shared the same trading personalities, clicking on the way they managed risk and thought about trading, Mr. Law recalled.

Over the years, Mr. Law began to take a more active role both internally and externally. “We’ve certainly spent a lot of time with investors getting them comfortable with my style,” he said.

“Most transitions don’t work because of personality differences,” Mr. Law said. “The people approach trading in different ways. How do people react when there’s losses? How long are they willing to tolerate losses? It’s about Caxton remaining the same, not just about someone else taking over.”

 

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Thanks for posting.

 

Another veteran of Commodities Corporation retiring.


Former employees

In addition to its founder, the firm's early co-founders included a number of notable individuals, including

Paul Samuelson, nobel laureate economist
Paul Cootner, professor of finance at the Massachusetts Institute of Technology, noted for his role in the development of the Random walk hypothesis in his 1964 book The Random Character of Stock Market Prices.[8]
Amos Hostetter, notable equity and commodity trader for Hayden Stone

Also, a number of well-known Wall Street traders began their hedge fund careers at Commodities Corporation, including:

Paul Tudor Jones, founder of Tudor Investment Corporation
Louis Bacon, founder of Moore Capital Management
Grenville Craig, founder of Tiverton Trading
Bruce Kovner, founder of Caxton Associates
Christian Levett, founder of Clive Capital LLP
Michael Marcus, a leading commodities and currency trader
Jack D. Schwager, an author on financial topics and hedge fund manager
Ed Seykota, a computer scientist, technical trader and pioneer in System Trading
Willem Kooyker, founder of Blenheim Capital