Element Capital Management turned sharply bearish on the U.S. stock market in the fourth quarter of 2024.
The macro hedge fund headed by Jeffrey Talpins liquidated virtually its entire $2.2 billion U.S. equity portfolio during the three-month period ending in December, including its Magnificent Seven stocks, according to the latest quarterly 13F filing, made public on Tuesday. As of year-end, the firm had just $10.1 million in capital, per the filing. The firm has said it will return capital to investors, according to Bloomberg. Element is in good company: Point72 Asset Management, Citadel, and D.E. Shaw are also returning money.
Talpins usually uses most of his U.S. common stock allocation to invest in the broadly invested exchange-traded funds. But in the fourth quarter, Element fully unloaded its stakes in the iShares Core S&P 500 ETF and the Vanguard S&P 500 ETF, which previously had accounted for 45 and 43 percent of Element’s U.S. common stock assets, respectively, the filing says.
As recently as the quarter ending in June, Element held 58 different stocks, although two broadly invested ETFs accounted for more than three-quarters of the U.S. stock portfolio. Element currently holds just four U.S.-listed stocks.
Its largest position, accounting for nearly 70 percent of the small part of the portfolio that holds individual names, ironically for a macro fund, CME Group, which operates four derivatives exchanges: the Chicago Mercantile Exchange, the Chicago Board of Trade, the New York Mercantile Exchange, and The Commodity Exchange. Two of the three other positions were initiated in the fourth quarter: Ormat Technologies, a supplier of alternative and renewable geothermal energy technology, and Amer Sports, a maker of sporting goods and apparel.
Element declined to comment.
The recent moves come after the firm reportedly returned $6 billion to investors last year, reducing total capital to $3 billion. Element managed as much as $20 billion in 2020. Some of this selling indicates a potential need to liquidate positions to meet its goal or returning money to investors. However, if Element were bullish on U.S. stocks, it likely would have sold off positions from its other strategies.
The hedge fund mostly invests in fixed income, foreign exchange, and equity markets, according to a regulatory filing. On its website, the firm says it “integrates macro fundamental, systematic, and relative-value analysis in the formation and implementation of directional views.”
Element was up 22.5 percent in 2024 after losing money in each of the three previous years. It charges a 2 percent management fee and up to a 40 percent performance fee.
