New York (HedgeCo.net) – It usually isn’t a good idea to bring attention to yourself, but that especially holds true when the attention you have garnered is from none other than the United States Treasury. Element Capital Management, a New York based hedge fund, has purchased so much government debt in recent auctions that the firm is drawing attention from the Treasury Department.

According to a report in the Wall Street Journal, Element has been the largest bidder in a number of the 62 auctions going back to last November and has purchased as much as 10% of issues in recent auctions with some of the auctions involving over $30 billion in government debt.

The strategy behind the purchases isn’t specifically clear, but the idea is to take advantage of small discrepancies in the market and using leverage to do so. When you consider that Element has approximately $6 billion in assets under management, the recent bond purchases indicate a fairly large amount of leverage is being applied.

The strategy seems to be working so far in 2015 because according to the article in the journal, the fund was up 18.5% YTD through July. Of course the article also goes on to point out that a similar strategy was used by Long Term Capital Management in the 1990s.

Rick Pendergraft
Research Analyst
HedgeCoVest