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When Paul Tudor Jones II began his career as a Wall Street trader in the 1980s, some colleagues spoke admiringly of his ability to "shoot the lights out" by scoring huge profits on big market swings.
A Memphis native who cut his teeth trading cotton in New Orleans, Mr. Jones delivered gains of 125.9 percent after fees in his main hedge fund in 1987 by betting on a big downturn in the United States stock market, then 87.4 percent in 1990 as the market plunged in Japan. As late as 2001-02, he gained 48.1 percent over two years during the sell-off in technology stocks.
(Read more: With US data in the freezer, traders look overseas)
Lately, however, people are just as likely to talk about the dazzling four-and-a-half-minute Christmas light show at Mr. Jones's 13,000-square-foot mansion in Greenwich, Conn., as they are about his big market scores.
Over the last decade, Mr. Jones's trading results have dimmed. His investors say the reasons include a deliberate move to trade more conservatively, fewer big interest-rate and currency moves as central banks kept short-term rates near zero and more competition as the hedge fund universe has mushroomed.
While Mr. Jones can still claim long-term annual returns of close to 19.5 percent in his $10.3 billion flagship fund, Tudor BVI Global, it has been 11 years since he last hit that level, according to material provided to potential investors late last year.
From 2010 to 2012, he had his worst three-year stretch ever, averaging just 5 percent annually. Last year, gains hit 14.3 percent, investors say, helped by winning bets on Japan's stock market and against its currency.
But two smaller funds managed by other traders have been unprofitable since 2011. One of them, Tudor Tensor, which had a 35 percent gain in 2008, has shrunk to $700 million from $1.4 billion in 2010.
On Wall Street, Mr. Jones retains an outsize persona, based on the fame he first won in earning an estimated $100 million in the United States market crash of 1987, his longer-term trading success and his philanthropic efforts as a co-founder of the Robin Hood Foundation, dedicated to fighting poverty in New York City, a favorite Wall Street cause.
"He is a superb risk taker and a genius risk manager. He is really plugged into decision-makers around the world, from finance ministers to central bank officials to think tanks," said J. Tomilson Hill, head of alternative investing at the Blackstone Group, the world's largest hedge-fund investor. Mr. Hill says investors rely on fund managers like Mr. Jones as a counterweight to more volatile stock markets.
Unlike stock pickers who focus on individual companies or sectors, Mr. Jones is a so-called macro trader who aims to ride moves in interest rates and currencies based on changes in different nations' economies. Over the last five years, efforts by monetary authorities to revive the global economy by keeping rates low has "reduced the opportunity set available to those guys," said Kenneth J. Heinz, president of HFR, which tracks hedge fund returns.
(Read more: Cramer: Has market gotten too hot to handle?)
But other money managers say it is often difficult for market celebrities like Mr. Jones or John Paulson, who scored outsize gains on the subprime housing bust of 2007, to avoid disappointing investors down the road. "The bigger they get, the harder it is to repeat" the first big score, said Jeff Spears, chief executive of Sanctuary Wealth Services in San Francisco, which provides services for wealth advisers.
Other top macro traders have also hit bumps recently. Bridgewater Associates' $80 billion Pure Alpha fund returned 5.3 percent last year, below its 13.5 percent average since 1991. And Brevan Howard Asset Management's $28 billion Master Fund returned 2.6 percent, also well below its long-term average.
The type of market-trend trading practiced by Mr. Jones requires "concentration, stamina and quick thinking," said Mark Yusko, chief executive of Morgan Creek Capital Management, a longtime Tudor investor. He said Mr. Jones, who is 59, has been able to keep his head in the game in part by hiring "a lot of young guys" to help trade his funds.
Over the last two decades, Tudor has moved from a firm built around Mr. Jones's own trading prowess to a diversified partnership, with Mr. Jones accounting for only 20 percent of the positions in Tudor BVI, investors say. In the process, Tudor, based in Greenwich, has opened offices in London, Sydney and Singapore. Tudor lists 35 portfolio managers for four Tudor funds totaling $13.6 billion. Mr. Jones declined to comment.
An executive of a firm that has invested in Tudor's main fund for more than 20 years said that in his earlier years, Mr. Jones managed money mainly on behalf of wealthy individuals but over time expanded by accepting much larger sums from pension funds and other institutions. Institutions' concern with limiting losses has prompted Mr. Jones to invest more conservatively, added this investor, who spoke on the condition of anonymity because company policy prohibits comments about managers.
Although Mr. Jones sidestepped most of the 2008 stock market plunge, Tudor BVI did find itself with too many illiquid positions tied to volatile emerging-markets debt, mortgage assets, corporate debt and private equity, and reported a 4.9 percent loss, its only down year. That year, he also parted ways with his longtime partner, James Pallotta, a successful Boston-based stock picker, after Mr. Jones imposed tighter liquidity limits.
(Read more: Two reasons this legendary market bull is worried)
In a messy aftermath of restricting redemptions and coping with the illiquid positions, Mr. Jones restructured his main fund to bolster its liquidity. He also reduced individual traders' loss limits, cutting risk, according to a 2010 account by Institutional Investor magazine.
Amid his recent cold streak of 2010-12, Mr. Jones expressed unhappiness about the fund's results, Mr. Hill of Blackstone said. But Mr. Hill said investors had to lower their expectations in a "zero interest-rate environment" because they calculate their returns over risk-free rates, which fell to zero from 5 percent after the 2008 financial crisis. Heightened competition as the hedge fund universe has expanded to $2.5 trillion from $460 billion in 2000 has also limited trading opportunities, Mr. Hill added.
In 2012, Mr. Jones cut the management fee for a new share class of Tudor BVI, reflecting investor concern about performance. The new shares cut the management fee to 2.75 percent from 4 percent while increasing the firm's share of profits to 27 percent from 23 percent. Many hedge funds charge a 2 percent management fee and 20 percent of profits.
William Spitz, the former vice chancellor for investments at Vanderbilt University, which has been a Tudor investor, said the firm's fees were "quite high." He said the firm responded to questions about the fees by arguing they were needed to pay for "a lot of highly compensated people, a large infrastructure to control risk, with a lot of back-office support and systems."
Even the lower fee level of 2.75 percent is enough to bring the firm $283 million annually on the main fund alone.
But one investor noted that the accumulation of wealth could be distracting. "Your life becomes more complicated, and a little part of your brain has to deal with that," this investor said. With a reported net worth of $3.7 billion, Mr. Jones ranks No. 130 on the Forbes 400.
Beyond Robin Hood, Mr. Jones has also been chairman of the National Fish and Wildlife Foundation and the Everglades Foundation, two conservation groups. He owns a $30 million hunting and fishing lodge in Maryland, another home in the Florida Keys and since 2002 he has leased a 350,000-acre eco-reserve in Tanzania, where he co-owns four high-end lodges.
A top donor to the University of Virginia, his alma mater, he gave $44 million for a sports and concert arena there named after his father, and in 2012 he and his wife, Sonia, a yoga enthusiast, gave more than $12 million for a center there for "meditation, yoga and mindfulness training." Later that year, he was embroiled in an unsuccessful attempt to oust the college's president. Last year, he was featured on "60 Minutes" on CBS and on the cover of a Forbes issue for his Robin Hood work.
"I guess as we've all grown older, we've become a little more erudite and a little more conservative," said William Dunavant Jr., 81, a Memphis cousin of Mr. Jones and one of his earliest investors, who still has a substantial amount of his personal investments with him.
—By Randall Smith of The New York Times