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Alternative Market Briefing

Element Capital, a relative value fund with a twist: Uses volatility markets to express its macro views

Tuesday, November 07, 2006

On a recent visit to New York, I visited VegaPlus, a seeding platform which operates independently. VegaPlus has been formed in mid 2004 to incubate new strategies and mid-office, risk management, operational, legal, compliance, marketing and shareholder services to its fund teams. A fund that I looked into was the Element Capital Fund, a macro relative value (RV) fund that uses the volatility markets to express its macro views. The Fund strives to generate returns in all interest rate environments by positioning for its core views, as well as by betting against probabilistically mispriced securities.  Element also seeks to use its volatility expertise to extract alpha from option relative value and arbitrage strategies.

Put in other words, Element is a special mixture in that it develops macro views on the markets but, unusually, opts to express those views in a relative value (RV) format.  Most other funds will express macro views with directional exposure.  In addition, most fixed income RV funds trade interest rates and/or curves.  Element’s expertise is in the volatility/ options markets, which tend to react more slowly to events or developments than rates or curves.

  The management team is led by Jeff (Jeffrey) Talpins, who has focused on the fixed income options markets at Goldman Sachs and, more recently, at Citigroup/ Salomon for nearly 10 years.   He is supported by a team of 5 and state-of-the-art technology. Element has had an annualized return o......................

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