Tag Archives: hedge funds

Vultures and Venezuela Debt after the 2026 US Invasion

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After the brazen capture of Venezuelan strongman Nicolás Maduro on January 3, 2026, investors are racing to capitalize on President Trump’s ambitions to dominate the Western Hemisphere. Hedge funds and other investment firms, already boosted by a sharp rally in Venezuelan debt, are mapping out trips to Caracas to scope out on-the-ground opportunities. Some are investigating niche instruments, like arbitration claims and unpaid state debts. Others are eyeing debt in Colombia and Cuba, while shares of a tiny bank in Greenland—another territory in Trump’s sights—have surged recently as the U.S. president pursues his own spin on the Monroe Doctrine that saw 19th-century America claim half of the globe as its sphere of influence…

For years, most money managers deemed Venezuela off-limits, due to a thicket of U.S. sanctions, political repression and economic mismanagement. The country’s bonds, languishing at rock-bottom prices since a 2017 default, were mostly a playground for specialists in emerging markets or distressed-debt contrarians.

Now, investors reckon a combination of political change, U.S. intervention and American investment into Venezuela’s vast oil resources could put a debt restructuring within reach. Some hope investment opportunities could emerge in other industries that languished under Maduro…

Some hedge funds and investment firms are venturing into more-obscure assets, such as arbitration claims from corporations owed money by Venezuela. A range of Western companies whose assets were nationalized by Maduro’s predecessor Hugo Chávez have won settlements from the World Bank’s International Centre for Settlement of Investment Disputes.
With Trump in recent days signaling potential intervention in countries like Colombia, Cuba and Mexico, some investors are considering opportunities in those markets. In one sign of speculative fervor, shares of the tiny Bank of Greenland have surged as much as 42% this year, suggesting market participants anticipate an investment boom in Greenland.

Many emerging-market hedge funds “see the current backdrop less as a single trade and more as the start of a new opportunity set: more regime changes, more policy shocks, more forced sellers and more capital controls or realignments,” said Bruno Schneller, managing partner at the Swiss asset manager Erlen Capital Management.

Excerpt from Caitlin McCabe, Hedge Funds Get Ready for the ‘Donroe Doctrine’ Trade, WSH, Jan. 10, 2026

Currency Wars: the Yuan

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A handful of mainly U.S.-based macro hedge funds have led bets against China’s yuan since late last year (2015) and the coming weeks should tell how right they are in predicting a devaluation of between 20 and 50 percent. Texas-based Corriente Partners… [bets against the yuan].The firm reckons rush by domestic savers and businesses to withdraw money from China will prove too strong for authorities to resist and control, even with $3.3 trillion in FX reserves, the biggest ever accumulated.  London-based Omni Macro Fund has been betting against the yuan since the start of 2014. Several London-based traders said U.S. funds, including the $4.6 billion Moore Capital Macro Fund, have also swung behind the move.  Data from Citi, meanwhile, shows leveraged funds have taken money off the table since offshore rates hit 6.76 yuan per dollar three weeks ago…

That has prompted comparisons with the victories of George Soros-led funds over European governments in the early 1990s. Chinese state media on Tuesday warned Soros and other “vicious” speculators against betting on yuan falls.

“China has an opportunity now to allow a very sharp devaluation. The wise move would be to do it quickly,” Corriente chief Mark Hart said on Real Vision TV this month.”If they wait to see if things change, they will be doing it increasingly from a position of weakness. That’s how you invite the speculators. Every month that they hemorrhage cash, people look at it and say, ‘well now if they weren’t able to defend the currency last month, now they’re even weaker’.”

“It’s a popular trade. I can’t imagine a single western hedge fund has got short dollar-(yuan),” Omni’s Chris Morrison said.Derivatives traders say large bets have been placed in the options market on the yuan reaching 8.0 per dollar and data shows a raft of strikes between 7.20 and 7.60. The big division is over pace and scale.  Corriente and Omni both say if China continues to resist, it may be forced this year into a large one-off devaluation as reserves dwindle….

China’s response to yuan pressure has underlined a difference with earlier currency crises: Beijing has an offshore market separate from “onshore” China into which it can pump up interest rates at minimal harm to the mainland economy.  Earlier this month, it raised offshore interest rates, making it prohibitively expensive for funds to leverage overnight positions against the yuan. That sent many reaching for China proxies, including for the first time in years, the Hong Kong dollar.“We have a direct position in the (yuan) but it’s much easier to trade second-round effects of China,” said Mark Farrington, portfolio manager with Macro Currency Group in London. “The Korean won, Malaysia, Taiwan, are all easier plays.” … [Hedge funds] say Beijing may have spent another $200 billion of its reserves in January 2015; at that rate, most of its war chest would evaporate this year and the yuan weaken by a further 18-20 percent. Omni’s Morrison states “That is a fundamental misconception [to believe that Chinese authorities control the yuan]. They’re not making the tide, they’re just desperately holding it back.”

Excerpts from PATRICK GRAHAM, Hedge funds betting against China eye ‘Soros moment, Reuters, Jan. 26, 2016