BlueCrest doubles money in bond market rout

BlueCrest Capital, the investment firm co-founded by billionaire bond trader Michael Platt, has more than doubled its money this year after betting that inflation and rising interest rates would pummel debt markets.

The secretive group, which was once one of the world’s biggest hedge funds before opting to convert into a family office in late 2015 to take more risk in markets, has so far this year made a return of 114 per cent, according to a person familiar with its returns.

Such a gain ranks BlueCrest as one of the world’s top performing investment firms in what has been a volatile year for many hedge fund managers. While the level of the firm’s total assets is unclear, such returns are nevertheless highly unusual for a group managing billions of dollars of assets.

Hedge funds on average are down 4 per cent this year, according to data group HFR. Yet some firms trading bonds and currencies such as Brevan Howard, Caxton Associates and Rokos Capital have managed to prosper — although not to the same extent as BlueCrest.

The returns mark another fillip for Platt’s personal wealth. This year his personal fortune was estimated at £10bn by the Sunday Times Rich List, ranking him the joint 11th wealthiest person in the UK.

A large portion of BlueCrest’s gains this year have come from betting on the sharp sell-off in government bonds around the world as central banks have raised interest rates aggressively in an effort to get inflation under control.

Yields on the 10-year Treasury note have jumped from less than 1.5 per cent to 3.6 per cent this year as the US Federal Reserve has tightened monetary policy. In the UK, which has been hit by severe financial market turbulence in recent days, 10-year gilt yields have soared from under 1 per cent to 3.9 per cent. Yields rise as prices fall.

BlueCrest has also made money with bets against emerging market assets, said another person familiar with the firm. BlueCrest declined to comment.

The firm managed about $36bn at its peak in 2012 but, like many macro hedge funds trading in markets dominated by central bank bond-buying, suffered a number of years of lacklustre returns in its flagship fund. At the end of 2015 it unveiled plans to return outside investors’ money and become a family office — a firm managing internal money — running several billion dollars in assets.

Platt said at the time that the switch meant his investment strategies would be less constrained by institutional investors who demanded lower-risk products.

BlueCrest has subsequently posted years of large gains, dwarfing the performance of most hedge funds. US billionaire Louis Bacon also made big gains at his firm Moore Capital after deciding to return money to outside investors.

Last year BlueCrest Capital Management UK was fined more than £40mn by the UK financial regulator for “reckless” conduct in failing to manage a conflict of interest. The previous year it agreed to return $170mn to former investors in a settlement with the US Securities and Exchange Commission, which had said it prioritised an internal hedge fund over its flagship fund.

laurence.fletcher@ft.com