Wed. Dec 1st, 2021


Element Capital suffered a loss of about $ 1 billion last month, making the New York hedge fund managed by Jeffrey Talpins one of the biggest victims of the October bond market tumult.

Element, which with $ 15 billion in assets is one of the world’s largest macro-hedge funds, lost 6.7 percent in October, according to people familiar with the fund’s performance. That takes the firm’s loss this year to 9.9 percent.

The group declined to comment.

The loss comes after a painful month for macro-hedge funds, several of which were offset by the fluctuations in fixed-income markets prompted by a reassessment of how fast global central banks will act to slow down the rapid growth in prices affecting many economies.

Among other funds suffering were Chris Rokos’ assets of $ 12.5 billion Rokos Capital, which lost about 18 percent last month. Alphadyne in New York also lost money, while Crispin Odey in London suffered nearly 50 percentage points of performance losses from early October to the end of the month.

Many executives, who expected interest rates to remain low for some time based on what central banks said earlier in the year, were surprised by the Bank of England’s tip at the end of September that it was raising interest rates before the end of the year. may increase to try to combat inflation. The more faltering BoE sentiment, coupled with decisions by policymakers in Australia and Canada to start curbing stimulus programs, has caused a slump in short-term government bond prices around the world.

Some funds have been misled by positions they have held in short-term bonds. Others lost money when “steeper trades” – bets that long-term returns would rise faster than short-term returns – were hit, forcing some executives to liquidate positions. Yields rise as prices fall.

Element is one of the macro-hedge fund sector’s best performers over the long term, with average annual gains of more than 18 percent over the 16 years since its inception. It has been closed to new investors since 2018, and this year the Financial Times reported he intended to return $ 2 billion in cash to investors to focus on performance.

The firm made one of the most progressive betting of the pandemic last fall, which told customers that the BioNTech / Pfizer vaccine would be 75 to 90 percent effective, far more than investors expected. Two weeks later, the companies announced that the vaccine was more than 90 percent effective, causing a huge surge in many stocks.

In September, the firm, which uses a series of economic research to place bets on movements in securities, currencies and commodities, rented Gertjan Vlieghe, who was a member of the BoE’s monetary policy committee until August.

Additional post by Robin Wigglesworth

laurence.fletcher@ft.com



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