New York (HedgeCo.net) – One of the hottest trades for hedge funds at the beginning of 2015 was to buy high-yield debt on energy companies. One of the hottest trades among hedge funds this year appears to be shorting China’s yuan.

The Wall Street Journal, Reuters and Business Insider all had articles on the subject over the weekend and HedgeCo.net was contacted about the subject last week as well. The main theme of the Journal article was the big-name firms that were betting against the yuan.

According to the article, Hayman Capital Management has approximately 85% of its portfolio invested in bearish bets against the yuan as well as the Hong Kong dollar. Other fund managers taking a bearish posture include Stanley Druckenmiller, David Tepper and David Einhorn.

Here is what we stated to the reporter that contacted us last week:
Betting against Asian currencies seems like a crowded trade and crowded trades have a harder time making big moves in the direction of the crowd. The first ones in the trade benefit as others pile on and drive the currencies down, but once the first adopters see a nice profit they may start taking those profits and that adds some buying pressure to stop the decline. Those funds counting on a quick and huge move to the downside for the yuan may be disappointed in the end. It may take patience for it to work.

Rick Pendergraft
Research Analyst
HedgeCoVest