For a while, it looked like the backdrop against which global financial markets operate was returning to normal. The Federal Reserve was raising interest rates, as was the Bank of England. The European Central Bank had turned off its monetary spigot, halting its bond-buying program. For 2018, the amount of global negative-yielding debt averaged about $7.5 trillion, down from more than $10 trillion in September 2017 and a peak of more than $12 trillion in mid-2016.

It didn’t last. With the world economy in a coordinated funk, central banks are once again easing monetary conditions. The Fed has cut borrowing costs three times this year. The ECB has driven its deposit rate even deeper into sub-zero territory, and has resumed bond purchases. Negative yielding debt is once again above $12 trillion, albeit down from a peak three months ago of $17 trillion. Financial repression is alive and kicking.

So it’s perhaps not much of a surprise that Louis Bacon is stepping away from Moore Capital Management, which will return money to investors from three of its flagship funds while continuing to invest on behalf of the firm’s partners. “Reducing our asset base with this return of client capital will obviate the necessity for my taking on the lion share of the risk of the firm on a daily basis,” Bacon wrote in a letter to investors, a copy of which was seen by Bloomberg News.

As a so-called macro specialist, Bacon made his name exploiting the discrepancies between global interest rates and bond yields. But if the world’s major central banks are moving in lockstep and bond yields are becalmed at low levels, there’s less opportunity to make money.

Macro hedge funds have gained an average of about 8% this year, according to figures compiled by hedge fund database EurekaHedge. While that’s better than last year’s decline of about 4.5%, it’s dwarfed by the 24% gains in the Standard & Poor’s 500 index of leading U.S. stocks and the 21% available from the MSCI World Index of global equities. Global corporate debt, meantime, has returned almost 14% this year.

Other storied macro managers throwing in the towel in recent years include Paul Tudor Jones, who shut his Discretionary Macro Fund at Tudor Investment Corp., Hugh Hendry, who closed his Eclectica Fund, and John Burbank, who shuttered his flagship macro fund.

At the start of 2018, Bacon’s firm managed about $13 billion. By September of that year, he was down to $10.2 billion, and by the end of 2018 his firm oversaw $8.9 billion, according to the FT.

He’s far from alone in losing customers. Investors pulled $180 million from macro hedge funds in October, marking the 10th consecutive monthly net outflow from that flavor of hedge fund, according to data compiled by eVestment.

In total, hedge fund assets have declined by $77 billion this year alone, the research firm estimates, leaving the industry as a whole managing a smidgen more than $3 trillion. Unless and until the hedge fund crowd can outperform the broader indices, investors will continue to withdraw their cash — and the former stars of the investment universe will continue to dim.

(Corrects third paragraph to remove reference to MCM shutting up shop. This column was also earlier updated to add a reference to the letter to Moore’s investors in the third paragraph.)

To contact the author of this story: Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

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