Betting on uncontrollable inflation, going against the Federal Reserve! The new U.S. Treasury Secretary's fund made a big profit in 2022

The new U.S. Treasury Secretary Bessent has long criticized the Federal Reserve, and he has demonstrated this with his actions, which are in direct opposition to the Federal Reserve.

In 2022, Bessent's hedge fund Key Square bet that the Federal Reserve misjudged the inflation situation, expecting high inflation in the U.S. to persist after the pandemic. He chose to short fixed-income assets and underperforming tech stocks, resulting in a 29% return, far exceeding the overall market performance.

Before being nominated as U.S. Treasury Secretary, Bessent stated in an interview in October that if it weren't for Powell's timidity, the Federal Reserve would have raised interest rates as early as 2021 to curb inflation, but Powell did not do so and instead conspired with the White House to keep his job.

This further solidified Bessent's image as a seasoned financial professional, and supporters of his appointment as Treasury Secretary believe that his ability to navigate financial turmoil is crucial for the Trump administration:

Bessent is very rational and can find opportunities in global markets, excelling at generating returns in chaos... He is adept at using various financial instruments. In contrast, he may find it harder to identify breakthroughs when market conditions are stable.

The media reported that Stanley Druckenmiller, the second-in-command at Quantum Fund who recruited Bessent to the firm, stated in an interview:

Bessent has seen almost every possible problem and may be more experienced than anyone who has held this position... I believe he is a very suitable candidate for Treasury Secretary.

However, there are also dissenting voices in the market, with some investors arguing that aside from his outstanding performance in 2022, Bessent's track record "pales in comparison to legendary fund managers like Druckenmiller," which has become a point of attack for some opponents:

If he were truly a very successful hedge fund manager, his firm's business scale should be large enough, and he might not be willing to take a government position just based on that.

Insiders have indicated that Bessent's Key Square fund reached a peak asset size of $4.5 billion. However, since 2015, its average annual return has remained around 5%-9%. It had four profitable years, four losing years, and one year with no gains or losses.

Notably, in 2023, Key Square's returns have achieved double digits, and it is expected to continue growing in 2024