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A hedge fund managed by Carlyle Group LP’s Emerging Sovereign Group plunged 43 percent this year through August as its wager against China soured.

Brian McCarthy’s Nexus fund saw assets erode to $125 million from roughly $500 million at the start of 2016, according to an investor document viewed by Bloomberg. This year’s loss marks a reversal from 2015, when the fund rose 35 percent.

Randall Whitestone, a spokesman at Carlyle, declined to comment on behalf of ESG.

The fund is a small part of ESG’s business, which managed $3.5 billion as of July. Carlyle, whose hedge fund business has been losing assets, is exiting its majority stake in ESG after five years.

Nexus suffered its biggest monthly decline this year in March after the world’s second-largest economy stabilized and a surge of new credit drove a rebound in the property sector. Until February, New York-based ESG was among a group of hedge funds, including Passport Capital, Omni Partners and Odey Asset Management that made money by betting against China’s economy. Bears were also hurt earlier in the year as central bankers propped up the yuan.

China Bears

ESG is preparing for what it believes will be a “precipitous fall” in Chinese asset prices or the yuan by taking short positions on credit and the currency, the firm wrote in an investor document. The nation’s debt-deflation spiral can only be avoided by sharply lowering interest rates.

The fund profited last year when China’s central bank devalued the yuan by the most since 1994. McCarthy, who leads ESG’s Nexus strategy, was also able to cash in on a prediction he made last October during a conference call with clients that China would allow the yuan’s drop against the dollar to accelerate after the International Monetary Fund designated it as a global reserve currency.

Nexus stayed hot at the start of the year, climbing 24 percent in January as the yuan sank to its lowest level in five years. That was followed by losses in February and March of 14 percent and 33 percent, respectively, according to the investor document.

ESG founders Kevin Kenny, Mete Tuncel and Jason Kirschner are buying the Carlyle stake and will take full control over operations after the close of the deal, expected Oct. 31, according to an ESG letter to investors obtained by Bloomberg in August.

ESG was started in 2002 with seed capital from Julian Robertson, founder of Tiger Management.