According to a report in the WSJ, the largest buyer of U.S. Treasurys has been a “little-known New York hedge fund run by a former Yale University math whiz“. Element Capital Management, run by Jeffrey Talpins, has been the biggest purchaser of U.S. Treasury debt over the past 10 months. The firm, which looks to “exploit small inefficiencies in the world’s most liquid securities”, has raised some questions because its cumulative purchases of Treasurys looks to be more than the assets under management held by the fund.
According to a presentation given last year, Element utilizes a “unique probabilistic approach” as part of its investment strategy. But the firm also may be engaging in “bond-auction” strategies, which look to take advantage of supply and demand imbalances immediately after a new auction of Treasurys. The strategies have paid off for Mr. Talpins, who graduated from Yale and took Professor Robert Shiller’s class, and according to the article, in 2008 the firm was up 35% and in 2009 the fund returned 79%. Through July of this year, Element was up 18.5%. Talpins has closed the fund to new investors although when it has opened to new investors it has required as high as a $50 million minimum investment.