Investors Shun Anti-Yen Bet Despite Soro’s Seal of Approval

Published in the Wall Street Journal, February 14, 2013
By Ira Iosebashvili and Matthew Walter

• –Investors look to go other way as Soros bet against yen revealed
• –Some see pause in yen’s decline
• –Soros up almost $1 billion

For some bearish yen investors, a report that George Soros is also betting heavily against the yen means one thing: get out of the position.
Fund manager Alejandro Silva is one of many investors who believe that if a whale like Mr. Soros–who in 1992 made a fortune by betting against the British pound–is revealed to be betting against the yen, it’s a good time to go the other way. The thinking is that once big name hedge fund strategies become known to the public, these firms are likely to pull out of the positions, traders say.

The Japanese currency has fallen by almost 20% against the dollar since September, with the dollar recently trading at Y93.01. The decline coincides with the rise of Shinzo Abe, who was elected prime minister in December after promising to kickstart the country’s moribund economy through looser monetary policy and government stimulus.

“It’s a sign that it’s time to take the other side once you guys are printing it,” said Mr. Silva, a founding partner at Silva Capital Management in Chicago, which oversees $800 million in currencies and fixed income.   On Thursday, The Wall Street Journal reported that Mr. Soros scored gains of almost $1 billion on the anti-yen trade since November, citing people with knowledge of the firm’s positions. Others reaping big trading profits by riding the yen down include David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point LLC and Kyle Bass’s Hayman Capital Management LP, investors say.   Mr. Silva said he began betting against the yen late last year and took profits on the trade in January, when the dollar rose above Y90.

“There’s a herd mentality in currencies, like in any asset,” said J.D. Perry, portfolio manager at JP Global Capital Management in Baton Rouge, La., another investor who was positioned against the yen as it fell throughout the end of last year and sold those positions in January. “When I see a story like that, it’s probably a sign that it’s going to retrace some,” he said.  Even so, many of these investors remain longer term bearish on the yen, regardless of Mr. Soros.

“We’ve made a ton on money betting against the yen ourselves, and it would take an enormous move in the yen to get us out,” said Christopher Stanton, a portfolio manager at $650 million Sunrise Capital Partners. Mr. Stanton’s fund uses computer programs to identify momentum trends in the currency markets. He began betting against the yen when the exchange rate was at Y79 in November.
“The Bank of Japan has a definite exchange rate in mind, and I bet it’s a lot higher than people think,” Mr. Stanton says. “Short-term guys may get shaken out on the Soros news, but we’re staying in.”

Published in: on February 15, 2013 at 7:57 pm  Leave a Comment