Jeffrey Talpins’ Element Capital cuts manager numbers
Macro hedge fund parts company with 7 employees after disappointing May
Element Capital’s Jeffrey Talpins, one of the hedge fund industry’s biggest but least-known stars, is cutting about a tenth of his employees, according to people with knowledge of the plans.
Although largely unknown outside the money management world, Mr Talpins’ Element has emerged as one of the most successful “macro” hedge funds in an industry whose luminaries include Paul Tudor Jones, Alan Howard and Louis Bacon.
Element’s $18bn hedge fund has averaged annual returns of more than 20 per cent since 2005, producing steady and strong gains and never suffering a down year over a turbulent period that has wrongfooted many other macro hedge funds, which bet on big economic trends.
However, the fund suffered a tough December. After another disappointing month in May — when it was down 3.5 per cent, crimping its returns to 3.2 per cent so far this year — Element has closed what it calls its “portfolio manager programme” of quasi-independent trading centres, which receive money to invest separately from Mr Talpins and his core team.
The portfolio manager programme accounted for about 10 per cent of Element’s assets under management, and the closure meant that six portfolio managers and one analyst were recently let go, according to people briefed on the decision.
They are Matthew Isherwood, a former quant at Sabre Fund Management and Capula Investment Management; Don Carson, a former Brevan Howard fund manager; former Goldman Sachs trader Pablo Duran Steinman; Mark Dragten and Tom O’Shea, two former GAM portfolio managers; portfolio analyst Graeme Hawinkels; and George Polychronopoulos, a former managing director at JPMorgan’s chief investment office.
The employees who were let go either declined to comment, did not respond to requests for comment, or could not immediately be reached by the FT.
Element declined to comment, but a person briefed on the cuts said the closure of the portfolio manager programme was driven by a desire to focus the hedge fund’s resources on its core team, rather than because of the fund’s performance.
Details around how the media-shy Mr Talpins manages money are sparse. The hedge fund’s website only says that it has a “modern macro” style of investing that combines traditional economic, systematic and relative-value analysis. Despite high fees of between 2 and 2.5 per cent of assets annually, plus more than 20 per cent of performance gains, Element has more than trebled its assets under management since 2005.
As a result, Mr Talpins appeared on Forbes’ list of billionaires for the first time last year, with an estimated fortune of $1.7bn. He studied economics and applied mathematics at Yale, and went on to be a star bond trader at Goldman Sachs and Citigroup. Last year, he helped endow a new economic research centre at Yale, and his family foundation focuses on improving opportunities for inner-city children, according to his biography on the American Prairie Reserve, where he sits on the board.
Element’s 3.2 per cent return so far this year means that it is suffering a bout of underperformance relative to the hedge fund industry as a whole, which is up 6.8 per cent, according to HFR. However, the average macro hedge fund is up only 2.7 per cent so far this year.
The average macro fund has only returned 3 per cent a year on average since March 2005.