Bessent's hedge fund achieved high returns by making contrarian bets against the Federal Reserve, believing in 2022 that inflation would be more persistent than the Fed predicted.

Last week, Bessent was nominated by Trump as the new Treasury Secretary, with his flagship fund Key Square Capital achieving a 29% return in 2022, while the broader market declined.

This bet on rising inflation involved shorting fixed income assets and low-income technology stocks, which had received support from competitors including 'Cathie Wood.'

This move solidified Bessent's reputation as an expert in financial turmoil, with supporters arguing it is crucial for him to lead Trump's economy.

A person close to Bessent stated, 'Bessent is very smart, a global opportunist who excels in chaotic times. He can utilize various financial tools to stay ahead... but in peaceful times, he may struggle to find opportunities that stand out.'

The substantial returns in 2022 marked a resurgence for Bessent's fund, which had recently faced criticism for its sluggish performance over the years when his macro investment strategy found it difficult to gain an advantage in a low interest rate environment, similar to other macro-focused funds.

Trump chose Bessent to lead the Treasury last Friday, surpassing heavyweight figures on Wall Street including private equity boss Marc Rowan and investor Howard Lutnick.

This work will have a huge impact on the world's largest economy and the global market. His task will be to fulfill Trump's tax cut promise while managing the economic shock brought about by the elected president's plans to deport millions of immigrants and raise tariffs.

In 1991, billionaire investor Druckenmiller, who first hired Besant to join Soros Fund Management, said, "In terms of potential issues, Besant has probably seen all of them, more than anyone who has held this position before, I think he is a great choice."

Trump stated that Besant is one of the world's "most outstanding international investors and geopolitical and economic strategists," although critics were surprised by his nomination.

An investor stated that aside from Key Square's record returns in 2022, Besant is "far from" the status of legendary macro fund managers like Druckenmiller, Paul Tudor Jones, or Louis Bacon. The investor said, "If he did very well as a hedge fund manager, then his company would be large enough that he couldn't or wouldn't want to hold a government position."

According to an informed source, Besant's Key Square peaked at managing 4.5 billion dollars in assets, but its annual ROI has been in single digits since 2015. According to the person, the fund had four years of positive returns, four years of negative returns, and one year flat.

In recent weeks, Key Square's returns have become part of the competition for Treasury Secretary, with a document showing the fund's performance allegedly circulating in Wall Street chat groups, apparently to tarnish Besant's reputation.

Supporters say that his investment strategy and performance in 2022 reflect his sensitivity to risk and ability to remain calm in the face of economic turmoil, qualities that will soon be needed.

Besant once collaborated with George Soros, who is a target of hatred for many Trump supporters. The famous hedge fund mogul shorted the British pound in 1992 and shorted the Japanese yen in 2013. Soros injected 2 billion dollars into the fund he established in 2015.

People close to Besant indicated that one of his signature trades was betting on Japan's "Three Arrows" economic policy under then Prime Minister Shinzo Abe, through which Besant achieved strong performance growth.

Besant's success in 2022 came amidst supply chain disruptions, skyrocketing energy prices due to the Russia-Ukraine conflict, and massive COVID-19 stimulus spending, all contributing to inflation in the USA reaching decades-high levels, causing widespread pain for consumers.

Besant bet that inflation would last far longer than many economists (including the Federal Reserve and the White House) expected, shorting fixed income assets that would struggle to maintain themselves amid Federal Reserve rate hikes, as well as overvalued technology companies.

Although Key Square's roi soared, $S&P 500 Index (.SPX.US)$it fell over 18% in 2022. The sse conglomerates index from hedge fund research companies dropped by about 4%. According to two insiders, the company’s gains in 2023 reached double digits once again, and it is expected to achieve similar growth in 2024.

Besant's nomination for Secretary of the Treasury was welcomed by many on Wall Street, as investors prepared for a second Trump era. "He is not a loud person," said a former colleague of Besant, praising his calmness in crises. "Clearly, he is very advantageous in this position."

In a letter to clients in January, Besant outlined his arguments in favor of Trump. He wrote that the incoming president would "want to create an economic carnival and orchestrate what he might call 'the greatest four years in American history.'"

Besant also praised Trump's plan to reduce energy supply costs while downplaying the threat of increased tariffs. Besant wrote, "The 'tariff gun' is always loaded and on the table, but it rarely really fires."

Editor/Rocky