The "victim" of the Iran War: With a heavy position in gold and copper, the well-known hedge fund Caxton lost a huge US$1.3 billion in a single month, and its net worth plummeted 15%.

# Bao Yilong

Source: Wallstreetcn

London-based hedge fund Caxton’s $90 billion macro fund saw losses widen further in March, as conflicting signals from Donald Trump on social media made directional bets extremely difficult for macro funds. Surging oil and gas prices stoked inflation expectations, triggering a global bond sell-off that pushed UK gilt yields to their highest levels since 2008. Caxton, which had been bullish on UK gilts, bore the brunt of the rout, while its positions in gold, copper, and other commodities also suffered sharp pullbacks.

Amid violent market swings triggered by the Middle East conflict, Caxton has emerged as one of the hardest-hit institutions in this round of turmoil.

On March 25, the Financial Times cited two people familiar with the matter, reporting that Caxton’s $90 billion macro fund had slumped 15% since the start of March, with cumulative losses exceeding $1.3 billion as of last Friday.

Earlier reports indicated the fund had already lost roughly 7%, or more than $600 million, in the first week of March, with losses continuing to mount thereafter.

The losses stem ultimately from the sudden escalation of tensions in the Middle East. Oil and gas prices surged, sparking a bond market sell-off. Multiple positions held by Caxton came under pressure in this environment, with the fund’s macro strategy led by CEO Andrew Law.

### Bond Positions Hit Hardest, Metals Also Suffer

The bond market was the primary “killer” of hedge fund returns in this cycle.

Widespread expectations that soaring energy prices would significantly boost inflation and force central banks to resume rate hikes led investors to dump government bonds across the globe.

This dealt a severe blow to funds that had bet on rate cuts or engaged in so-called “steepener” trades—positions betting that short-dated bonds would outperform longer-dated ones.

However, since March, rate-cut expectations across major central banks have shifted sharply. Markets now widely see rate hikes as more likely than cuts this year, triggering steep declines in rate-sensitive short-term bonds.

(Policy rate expectations for the US, Eurozone, UK, and Japan)

Late last year, Caxton CEO Andrew Law expressed optimism about the outlook for UK gilts, arguing there was a “pricing anomaly” and that borrowing costs would converge with those of other major economies.

But UK gilts were hit particularly hard in the global bond rout, with the 10-year yield rising to its highest level since the 2008 financial crisis.

Beyond bonds, losses in Caxton’s commodity portfolio were also significant. The fund had profited from long positions in gold and copper last year, but both assets have pulled back sharply since the conflict erupted.

Gold, typically seen as a safe-haven asset, has fallen 15% cumulatively since the war broke out in late February, while copper prices have also declined in tandem.

### Policy Flip-Flops Leave Macro Traders in Limbo

Market participants note that a unique challenge in this market environment has been the extreme confusion in geopolitical signals.

One macro hedge fund manager said Trump’s frequent social media posts created “false dawns and sharp U-turns,” making trading decisions extremely difficult to navigate.

According to CCTV News, US President Donald Trump said on March 23 that he had ordered a five-day pause on all military strikes against Iranian power plants and energy infrastructure—after previously threatening to bomb Iran’s energy facilities.

As reported by Wallstreetcn, Trump’s announcement immediately triggered a rebound in bond prices and a pullback in oil prices, with Brent crude plunging more than 14% at one point.

(Brent crude futures tumbled as much as 14% intraday on Monday)

Following the US submission of a 15-point ceasefire proposal to Iran, Brent crude also briefly dropped below $100 per barrel, according to CCTV News.

The frequent reversals in policy signals have made it nearly impossible for macro funds to establish stable directional views, leaving institutions like Caxton—reliant on macro trend analysis—particularly vulnerable to losses in this shock.

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