A little-known New York hedge fund run by a former Yale University math whiz has been buying tens of billions of dollars of U.S. Treasury debt at recent auctions, according to The Wall Street Journal.
Element Capital Management LLC, led by trader Jeffrey Talpins, has been the largest purchaser in dozens of government-bond auctions over the past 10 months, people familiar with the matter said.
It is unclear why Mr. Talpins and his firm have been buying so many bonds and if his only motive is profit.
The buying is part of an apparent effort by the fund to use borrowed money to exploit small inefficiencies in the world’s most liquid securities market, a strategy that is delivering sizable profits, said people close to the matter.
The purchases have been drawing attention from the Treasury Department and Wall Street.
Mr. Talpins is an intense and reserved trader formerly at Citigroup Inc. and Goldman Sachs Group Inc. He is known for a tenacious style that can grate on rivals and once tested the patience of former Federal Reserve Chairman Ben Bernanke.
Element Capital has been the largest bidder in many of the 62 Treasury note and bond auctions between last November and July, these people said.
At many recent auctions, some of which involved sales of more than $30 billion of debt, Element purchased about 10% of the issue, these people said. That is an unusually large figure, analysts said.
Jeffrey Talpins’s Element is among the last to embrace ‘bond-auction strategies,’ trading maneuvers aim to take advantage of the effects of supply and demand in the Treasury market.
Element’s activity has raised questions because the cumulative purchases far exceed the hedge fund’s $6 billion in assets under management.