March 22, 2012

Kyle Bass loves asymmetric bets

Kyle Bass of Hayman Capital prefers to make investments in situations that could earn the hedge fund extraordinary profits. He looks for asymmetric bets where the risk-adjusted-return is out of norm. For example by predicting in 2009 that Greece will restructure, he bought cheap CDS and that resulted in a bet where the risk/return is 1/500… It seems that today Kyle Bass is having similar bet but on Japan. He believes that the focus will soon be on Japan and the country will face a debt crisis within 2-3 years. According to unofficial information, Hayman Capital betted on Japan problems by CDS, swaptions, puts on Yen as well as options on JGB. It’s hard to predict the risk/return here but we believe it’s between 1/15 – 1/100. Kyle Bass has expressed his pessimism about the yen many times on different TV programs. His target is 120 USDJPY which is about 45% from current levels.

Kyle Bass, an American hedge fund manager, is the Founder of Hayman Capital. He received extensive coverage in the financial press for profiting $590 million by short selling the sub-prime mortgage bond market, before that market crashed. In 2011, Bass initiated a huge position in Greek sovereign debt through CDSs. Media reports were that he could profit up to 650 times his investment should Greece default on its debt obligations.