Caxton Associates has emerged as one of the most prominent hedge fund casualties of recent market volatility, with losses at its flagship strategy exceeding $1.3bn in March as geopolitical tensions in the Middle East caused a drop in global assets, according to a report by the Financial Times.

The report cites unnamed sources familiar with the matter as revelling that the firm’s $9bn macro fund, led by CEO Andrew Law, is down 15% month-to-date. Losses had already reached roughly 7% in the opening week of March, underscoring the speed and scale of the drawdown.

The sell-off has been driven by sharp dislocations across energy and fixed income markets following the escalation of conflict involving Iran. Crude prices surged above $100 per barrel after disruptions to shipping through the Strait of Hormuz, a critical global oil route, intensifying inflation concerns.

Rising energy costs have prompted investors to reassess the outlook for interest rates, with expectations shifting away from cuts and towards tighter policy. As a result, government bonds have sold off globally, with UK gilts particularly affected—10-year yields climbing to levels not seen since 2008.

This backdrop has proven challenging for macro hedge funds positioned for declining rates or running curve steepening strategies, both of which have come under pressure amid the abrupt repricing.

Caxton’s losses reflect a reversal in key themes that had previously supported performance. The firm had entered the year with a constructive view on UK government bonds, arguing that yields were misaligned with global peers and likely to fall.

In addition, trades linked to commodities have moved against the fund. Gold – typically viewed as a defensive asset – has declined since the outbreak of hostilities, while copper prices have also weakened, further weighing on returns.

The scale of the drawdown highlights the challenges facing discretionary macro managers navigating fast-moving geopolitical shocks and cross-asset correlations. While such environments can create opportunities, sudden shifts in inflation expectations and policy outlooks have exposed positioning risks across the hedge fund sector.