(Bloomberg) — Jeff Talpins’s Element Capital Management is preparing to have fewer investors and run mainly its own capital amid a fresh downsizing after a record year of losses.
The New York-based firm told clients on Wednesday it will give back an undisclosed sum to its investors in order to manage lower assets and aim for higher returns, according to a person with knowledge of the matter.
The firm also intends to have fewer outside investors in future, as it shifts toward internal capital as the majority of its assets, the person said, asking not to be identified because the details are private.
A spokesperson for Element declined to comment.
Element has been closed to new money since 2018. After about a 10% loss last year and declines in the previous two years, the fund gained 5.3% in January.
It’s the fourth time Element has given back capital since its debut in 2005, and brings its total returns to over $8 billion, it told clients on Wednesday. Combined with withdrawals after the fund raised its incentive fees in 2019, Element has seen assets shrink to about $8.5 billion from a peak of $18 billion.
Talpins has been one of hedge fund industry’s most revered and sought-after macro traders, with a fund that has produced annualized gains of almost 15% since launch, turning him into a billionaire. He told clients they all made positive returns over the lifetime of their investments.
One of Talpins’s most audacious moves came in July 2019, when his firm warned it would hike performance fees to 40% by year-end to help reduce the capital it managed by one-fifth. Billions of dollars left the firm, allowing Element to shrink while many of its peers were luring assets with cheaper fees and concessions.
Read More: Talpins Hikes Fees to 40% at Element Fund, Defying Industry
Talpins has tried to avoid the pitfalls of becoming too big to navigate the markets, an affliction that has held back several large funds over the years. Element’s latest redemption plan comes less than a year after the firm returned capital in a similar move to keep it nimble enough to trade.
Element started as part of Vega Asset Management before Talpins — who previously worked in fixed-income trading at Citigroup Inc. and Goldman Sachs Group Inc. — spun it out in 2007. His net worth is estimated at $2.4 billion by the Bloomberg Billionaires Index.
Some of the world’s most prominent hedge fund managers have turned their focus to managing their own money in the past few years, marking a generational shift in the industry. Louis Bacon said in 2019 that he was stepping back, following a run of lukewarm performance, while John Paulson converted his firm into a family office.
In London, Michael Platt has rapidly expanded his wealth since 2016 after he handed back about $7 billion to focus on trading for himself. His BlueCrest Capital Management has produced double-digit gains since then, making 20% last year and a record 153% the year before.
–With assistance from Katherine Burton and Hema Parmar.
(Adds performance in fifth paragraph.)
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