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SLJ Hedge Fund’s Stephen Jen Says Bill Ackman is Focusing On the Wrong Problem

SLJ Hedge Fund’s Stephen Jen knows the currency markets. He is one of the industry’s most high-profile investors, a former currency strategist at Morgan Stanley and most recently a managing partner at SLJ Macro Partners LLP, a hedge fund that he founded.

Jen and Repegging the Hong Kong Dollar

Jen says he would not bet on repegging the Hong Kong dollar. According to the Wall Street Journal, he doesn’t think that is where the problem is nor the solution. Right now the Hong Kong dollar is pegged to the US dollar at HK$7.80.  It is allowed to trade from HK$7.75 to HK$7.85. It has come under speculation several times in the past two decades because it presents a potentially asymmetrical return – losses are minimal because the Hong Kong Monetary Authority steps in to keep things from going too low, while investors can earn practically unlimited gains if the peg breaks. Right now, the currency is especially fragile thanks to the weakness of the US dollar and the mounting strength of the Chinese yuan.


Enter Bill Ackman

Bill Ackman, the prominent hedge fund manager and founder of Pershing Square Capital Management usually takes activist positions on equities but he is making a rare bet on the macro trade. Ackman says that the Hong Kong dollar is the “most undervalued currency.” By his estimates, the currency will repel higher than 30% of its current level. Ackman is maintaining his stance even though the Hong Kong Monetary Authority has announced several times that it has no plans to change the peg.