Kyle Bass called the housing crash. Now he's launching a new fund that will reportedly use 200-times leverage to bet on a Hong Kong currency collapse.
Kyle Bass is creating a high-risk bet that Hong Kong's currency will break free of its peg to the US dollar,The founder of Hayman Capital Management has already shorted the currency for more than a year and now plans to use options contracts with 200-times leverage to bet the peg will collapse in 18 months.
Should a combination of coronavirus fallout, anti-government protests, and economic recession break the peg, Bass and his investors stand to print massive gains. If not, his clients will lose all the cash they raised.
It's unknown how much Bass is raising for the position. His new fund will hold clients' cash for at least two years and charge a one-time 2% management fee. Bass will also charge a 15% performance fee that jumps to 20% if the position's return tops 100%, Bloomberg reported.
When Bass began betting against the pairing, Hong Kong had just kicked off widespread protests against mainland China's government. The civil unrest and violence dragged the city into a recession in October. Newly stoked tensions between the two governments and lasting coronavirus fallout place new pressure on the peg.
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