A lot of UK hedge funds cut headcount in the face of lacklustre performance and pressure on fees last year. Caxton Associates, the $8bn New York-based hedge fund, has been hiring in London regardless.
Newly released accounts for its UK LLP demonstrate why – it made £95.7m in profits last year, up from £15.8m in 2015 and £6.2m the year before. In other words, over the past 12 months, profits in its UK operation have increased by 504%.
Hedge funds usually run as limited partnerships in the UK, which means that any profits are poured back in the form of ‘member remuneration’. All of Caxton’s £95.7m was allocated to its partners’ pay.
However, Caxton, like most London hedge funds, has a number of entities registered with UK Companies House, which form different parts of its business. Caxton Europe Asset Management Limited is the main company that houses the majority of its employees, as well as being the member of the LLP to which it allocates most remuneration, usually to cover general expenses.
Last year, £58.2m went to its highest paid member, which is usually the parent company, leaving £37.5m for the remaining 10 partners – or a £3.75m average payment. Even in the context of partner pay in hedge funds, which usually stretches into seven figures, this is near the top of the pile.
Caxton added two members to its team last year, but has been hiring over the past few months and now has 56 people registered with the Financial Conduct Authority in the UK, up from 49 at this point last year.
Earlier this month, it hired Stuart McQuaid, who was most recently a trader at hedge fund Horizon Asset LLP, but has been adding money managers throughout 2017. James ter Haar and GJ Prasad, both portfolio managers at Millennium Management, joined in March, while Tom Frost, who was previously managing director and head of UK insurance and pensions at Credit Suisse, is its new head of business development for Europe and Asia.
Caxton reportedly gained 2% in the immediate aftermath of Brexit, but across the organisation it hasn't been all positive. Like most macro funds, Caxton trimmed its management fees from 2.6% to 2.2-2.5% of assets in September last year amid mounting pressure from investors. Still, it remains among the more expensive hedge funds, with a 27.5% cut of any profits it makes.
Image: Getty Images