Santangel's Review

Commentary

HBS Case Study on Hayman Capital

Harvard Business School has published a case study on Kyle Bass and Hayman Capital. You can purchase the case here. A brief summary below:

  • Hayman was launched in 2006 with $33 million in AUM. It now has nearly $1 billion in AUM
  • It may take longer than expected for the decay in Japan’s fiscal condition to materialize but once it does, it will unravel very quickly
  • Demand for JGBs is driven in part by psychological factors — ie the owners have never lost money in them before
  • As Japan’s population ages, they will become net spenders, impacting demand for JGBs
  • Even a small increase in interest rates would have large consequences for Japan’s budget, leading to potentially the “Keynesian end-point”. Robust GDP growth could potentially mitigate this problem though
  • Thinks that Japan will have a negative capital account in 24 months
  • If Japan cannot fund itself internally, it will have to rely on international capital market,s which will demand higher interest rates
  • Bass thinks that political considerations will prevent Japan from liquidating its financial asset holdings in the event of a crisis.