Element Capital, one of the world’s largest macro-hedge funds, plans to return around $ 2 billion in liquidity to clients, in the latest sign that some top-performing funds are limiting their size after a year of big gains during the coronavirus crisis.
New York-based Element, which was created by billionaire Jeffrey Talpins and manages $ 18 billion in assets, wrote to investors this week to let them know that it plans to pay the money back early this year. because he wanted to focus on performance rather than asset raising. This will be the second time the company has returned money in just over a year, having returned around $ 3.6 billion at the end of 2019.
The fund, which made a premonitory bet on the effectiveness of the coronavirus vaccine late last year, has become one of the hedge fund winners of the pandemic, gaining 18.8% in a wild 2020 for markets, according to a no one who had seen the numbers.
Hedge funds have become increasingly reluctant in recent years to increase their assets too much, after seeing the performance of several large funds suffer. Additional assets can mean higher management fees for fund managers, but becoming too large is increasingly seen as a drag on performance as it can be more difficult for managers to sell their positions faster and longer. easily for rivals to identify their transactions.
Some in the industry indicate that Brevan Howard, once considered the gold standard of macroeconomic investment for his record annual gains, suffers from excessive size, having hit around $ 40 billion in 2013. He then lost by money in three of the countries. after four years, and assets have fallen as low as $ 6 billion.
Winton founder David Harding, whose hedge fund company has suffered mediocre returns and declining assets, recently wrote to clients to say that having fewer assets “may even be an advantage”.
A number of top performing funds are limiting investor access or shrinking. Izzy Englander’s Millennium Management returned money to investors, while in December Caxton Associates told investors he would shut down his global fund, which gained 42% last year, at new money.
Element, which has been closed to new money since 2018, took advantage of the strong market rebound last year, writing to clients on March 23, the same day the S&P 500 bottomed out, to say that stocks seemed attractive given the large number of stimuli.
The fund made money from bets against European equities, with markets closing in September. He then wrote to clients on Oct. 26 to predict that the BioNTech / Pfizer vaccine would stun investors with 75 to 90 percent effectiveness and to say he had become more optimistic, according to a letter to investors seen by the Financial Times.
Two weeks later, the companies ad the vaccine has been shown to be over 90 percent effective, causing a fierce upturn in many stocks.