How The Huge Currency Hedge Fund FX Concepts Delivered Stellar Returns In 2010

Date: Thursday, January 6, 2011
Author: Katya Wachtel, Clusterstock

FX Concepts' Global Currency Program - a $3.2 billion currency hedge fund - earned returns of 12.53% last year by focusing on selling the coin of nations whose central banks pumped the most cash into the financial system, Bloomberg reported.

So the first half of the year, the fund bet against the Euro. And in the second half, it bet against the dollar.

The firm, which has about $8.5 billion AUM, is the world's biggest currency hedge fund and betting against the two currencies gave it their best returns since 2006.

Here's how its founder and chief, John Taylor, explained their bets to Bloomberg:

FX Concepts began selling the euro against the greenback in the first quarter on speculation Greece would need to tap the European Union for aid in meeting its debt payments.

The euro slid 6.5 percent against the dollar in 2010, falling from the year’s high of $1.4579 on Jan. 13 to the four- year low of $1.1877 on June 7, ending the year at $1.3384.

So what is Taylor's advice for 2011?

He says the euro will depreciate to $1 this year and “a good trade is short the euro and long the Australian dollar." He also said his firm is betting the U.S dollar will weaken into the second quarter and rebound as the Fed ends debt purchases in June -- “In the second quarter, when we expect to go long the dollar, it would likely be against the commodity currencies."