Kyle Bass’s Hayman Capital Management has launched two new hedge funds, according to regulatory filings. At the beginning of the year, the Dallas hedge fund firm began trading in the Hayman Hong Kong Opportunities Onshore Fund and an offshore equivalent.
According to the filings, Hayman raised more than $50 million for the funds, but the assets probably amount to a lot more.
The firm declined to comment on the new funds. The minimum investment is $100,000.
According to an investor in the funds, Hayman thinks that Hong Kong will soon break its policy of pegging its currency to the U.S. dollar, which has been in place since 1983. In recent years Hong Kong has allowed the currency to float within a very narrow range.
The peg was initially established to foster trade. But the U.S. dollar has been rising since late last year, pulling up the Hong Kong dollar with it and making it less competitive.
Hayman is said to be betting that once the peg is removed, the currency will be devalued. So, the new funds are going to be short Hong Kong–issued bonds and the Hong Kong dollar versus the greenback. Investors hope to hear more about this investment play when Hayman hosts its annual investor day in New York this week.
Hayman has worked Asian waters before. As we earlier reported, on July 1 the firm launched the Hayman China Opportunities Onshore Fund and its offshore equivalent, designed to take advantage of Hayman’s bearish views on China.
The macro fund emphasizes currency and interest-rate markets in Southeast Asia.
According to the Wall Street Journal, the fund was up about 6 percent in its first six months of trading.
On December 17, 2015, Hayman launched Covalent Funding Partners so it could invest in a single private security of a development-stage start-up company, according to a regulatory filing.
Hayman Capital Management’s most recent form ADV, a Securities and Exchange Commission filing for investment managers, reported that the firm managed assets of $1.7 billion as of July 31, 2015. Last May the Wall Street Journal noted that the firm was managing closer to $700 million.
A separate Wall Street Journal article reported earlier this month that Hayman Capital Master Fund, the firm’s main hedge fund, was up 24.83 percent in 2016 after losing roughly 10 percent in the first half of the year.
According to the report, Hayman successfully rode the U.S. dollar’s rise and simultaneously shorted several currencies, including the yen, euro, and yuan. The story cited two investors who said the fund shorted bonds in a number of countries, including the U.S. and Japan and in Europe as rates rose.
Bass is best known for cashing in on the mortgage crisis in 2008. He is one of a number of hedge fund managers. along with James Chanos of New York–based Kynikos Associates, who is extremely bearish on China.
Bass believes China is on the verge of a huge banking crisis, which will hammer the country’s economy and its currency, and ripple through other countries.
According to published reports citing a letter he wrote to clients in February 2016, Bass is very concerned about rapid credit expansion among Chinese banks. He fears this will lead to significant credit losses, requiring the recapitalization of Chinese banks and placing enormous pressure on China’s currency.
