Element Capital suffered a loss of around $ 1 billion last month, making the New York hedge fund headed by Jeffrey Talpins one of the most publicized victims of the October uproar in the bond markets.
Element, which with $ 15 billion in assets is one of the world’s largest macro hedge funds, fell 6.7% in October, according to people familiar with the fund’s performance. This brings the company’s loss this year to 9.9%.
The group declined to comment.
The loss comes after a painful month for macro hedge funds, several of which were caught up by swings in fixed income markets triggered by a reassessment of how quickly global central banks will act to slow the rapid growth in prices that affects many economies.
Other funds to suffer was Chris Rokos’ $ 12.5 billion capital, Rokos Capital, which lost around 18% last month. New York-based Alphadyne also lost money, while London-based Crispin Odey suffered almost 50 percentage points of performance losses from early October to the end of the month.
Many managers who expected interest rates to stay low for a while based on what central banks said earlier in the year were taken aback by the Bank’s hint. England at the end of September that it could raise interest rates before the end of the year to try to curb inflation. The more hawkish sentiment from the BoE, coupled with decisions by policymakers in Australia and Canada to start slowing down stimulus programs, has triggered a drop in prices for short-term government bonds around the world.
Some funds were taken on the wrong foot by their positions in short-term bonds. Others lost money as “steeper trades” – bets that long-term returns will rise faster than short-term returns – were hit, forcing some managers to liquidate positions. Yields increase as prices fall.
Element is one of the top performers in the long-term macro hedge fund industry, having generated average annual gains of over 18% in the 16 years since its inception. It has been closed to new investors since 2018 and this year the Financial Times reported that it plans to return $ 2 billion in cash to investors in order to focus on performance.
The company made one of the most premonitory bets of the pandemic last fall, telling 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 over 90% effective, sparking a huge rally in many actions.
In September, the company, which uses a range of economic research to bet on movements in bonds, currencies and commodities, hired Gertjan Vlieghe, who until August was a member of the BoE’s monetary policy committee.
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