| Kyle Bass, Hayman Capital Management (Bloomberg) |
Kyle Bass’s Hayman Capital Management has launched two new hedge funds designed to take advantage of the Dallas firm’s extremely bearish view on China.
The hedge fund firm officially launched Hayman China Opportunities Onshore Fund and its offshore equivalent on July 1. It is not known exactly how much money was raised for the new funds. According to regulatory filings, the two funds raised at least $850,000. The minimum investment in the new funds is $100,000. Hayman and Bass declined to comment.
Bass is best known for cashing in on the mortgage crisis in 2008. This year Hayman Capital is said to have been hurt by losing energy positions.
Hayman Capital Management reported in its most recent form ADV, a Securities and Exchange Commission filing for investment managers, that it managed assets of $1.7 billion as of July 31, 2015. In May the Wall Street Journal reported that the firm was managing closer to $700 million.
The WSJ said Hayman’s main fund, Hayman Capital Master Fund, has risen a net 285 percent since its inception a decade ago. That compares with the Standard & Poor’s 500 stock index, which has roughly doubled in value, including dividends reinvested, in that same period.
Bass is one of a number of hedge fund managers, including 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, 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. Bass has pointed out that Chinese banks have $34 trillion in assets, which works out to 340 percent of gross domestic product.
“Credit in China has reached its near-term limit, and the Chinese banking system will experience a loss cycle that will have profound implications for the rest of the world,” Bass reportedly wrote in his February letter. “What we are witnessing is the resetting of the largest macro imbalance the world has ever seen.”
In the new fund Hayman does not plan to short individual stocks. Rather, the fund will play this ominous macroeconomic scenario in the currency and interest rate markets of Southeast Asia.
Hayman’s main funds invest around the world and vary by liquidity. Investors in the new funds must lock up their capital for two years.
