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Hedge fund Element hires former MPC member Gertjan Vlieghe

Element Capital Management LLC updates

New York-based hedge fund Element Capital has hired Gertjan Vlieghe, who until last month was a member of the Bank of England’s rate-setting Monetary Policy Committee, as its chief economist.

Element, which with $15bn in assets is one of the world’s biggest macro hedge funds, made the appointment to further strengthen its macroeconomic research, said a person familiar with the move.

Element confirmed the hire but declined to comment further.

The appointment highlights the value of central bank economists and policymakers to hedge funds.

In 2015, former Federal Reserve chair Ben Bernanke joined Ken Griffin’s hedge fund Citadel as an adviser on monetary policy. His predecessor Alan Greenspan worked as a consultant for Paulson & Co, which made huge gains during the financial crisis, after he left the Fed.

Vlieghe was an external member of the BoE’s nine-member MPC, which sets UK interest rates, for six years before his term finished at the end of last month. He was previously a partner and senior economist at macro hedge fund Brevan Howard Asset Management. He has also worked as a bond strategist at Deutsche Bank and as economic assistant to former BoE governor Mervyn King.

Element, which was set up by billionaire Jeffrey Talpins, uses wide-ranging economic research to take bets on moves in bonds, currencies and commodities.

It wrote to its clients on March 23 last year, the same day the S&P 500 hit a low, to say stocks looked attractive because of the large amounts of monetary and fiscal stimulus. It also profited from betting against European stocks as markets sold off in September.

It made a further prescient bet on stocks in the autumn, telling clients that the BioNTech/Pfizer vaccine would be 75 to 90 per cent effective, far more than investors were expecting. Two weeks later, the companies announced the vaccine was more than 90 per cent effective, sparking a huge rally in many stocks.

Vlieghe’s appointment comes as macro funds face a trickier trading environment. Many made big gains last year, helped by a large rally in government bonds as the pandemic hit share prices.

But this year, many have been wrongfooted by the government bond market. Macro funds had been betting that stimulus measures and the end of lockdowns would mean higher inflation, hitting government bonds, but the market has shifted since then and a number of funds have suffered losses.

Element gained 18.8 per cent last year but is down about 3 per cent this year, said a person familiar with the performance. It has made annualised gains of more than 18 per cent over the 16 years since it was founded.

Vlieghe is set to join the fund before the end of the year and will be based in London.

Element has been closed to new investors since 2018. Earlier this year the Financial Times reported that the fund was returning $2bn of cash to investors. It told clients it wanted to focus on performance rather than on gathering assets.

laurence.fletcher

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