Page 176

not part of the funds but provide another source of information flow and intelligence.

Founded in April 1983 with assets of $7.6 million, Caxton Corporation now has assets of $4.5 billion. There are three hedge funds—Essex, GAMut, and Caxton Global—and a few small stock funds. Caxton Iseman Capital does private equity deals. (Caxton provides a home and capital for Fred Iseman.) A small percentage of assets of Caxton Global can be allocated to less liquid deals such as private equity.

Caxton Corporation consists of 160 to 170 people, of which about half are in the New York City office. Kovner sees New York City as a big plus. "You can see and talk to all kinds of people, government officials, scholars, economists. It is the world capital . . . I wouldn't want to be anywhere else." The Plainsboro, New Jersey, office serves as the back office and research center.

Kovner's goal is absolute return. With assets under management at $4.5 billion and assets at their peak, Kovner says, "I don't want to grow faster than capacity." He will allow money in if the firm is within liquidity limits of its capacity. Once liquidity limits are reached, he sends money back. For example, in June 1995 with assets at $1.8 billion, Kovner returned two-thirds to investors in order to improve performance. At the time, he said in a press release, "Under current market conditions, roughly $2 billion in trading capital is proving unwieldy. I think that a smaller capital base will help us return to our historically high profitability. . . . The lower liquidity in currency, fixed income, and commodity markets hurt our performance as our funds grew larger. In addition, I think Caxton has gotten too big and bureaucratic. This downsizing will help us respond in a more focused and agile manner." Kovner expects to pay out dividends from time to time so as not to grow faster than capacity.

Caxton principals' assets vary as a percentage of the total, and are currently under 30 percent of the assets.

DIVERSIFICATION WITH 27 TRADING CENTERS

Kovner describes Caxton's approach as top-down. "We make a judgment on what the world is like. Then we ask, given that the world is like this, where are the opportunities? Some periods are great for stocks; other periods are great for commodities." Kovner observes