(Bloomberg) — A former hedge fund manager whose firm made billions in the course of the global financial crisis is able to pounce on volatility again, as he sees threats to market stability at a level not seen since 2008.
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Steve Diggle’s family office Vulpes Investment Management is looking for as much as $250 million from investors as early as in the primary quarter, the Oxford, UK-based investor said in a telephone interview.
Diggle, whose firm made $3 billion between 2007 and 2008, is raising the cash for a hedge fund and managed accounts designed to generate hefty returns in market crashes and take advantage of wagers on rising and falling stocks in calmer periods.
The thought to begin the brand new fund got here about after the firm developed a model to make use of artificial intelligence to read large volumes of public information. It helped spot Asia-Pacific corporations with high probability of blowups, as a consequence of dangerous behavior resembling high leverage, asset-liability mismatch and even outright fraud, Diggle said. The equity portfolio will even have single stocks or indexes as bullish wagers.
Diggle is making his biggest push into volatility trading, after the March 2011 closure of his predecessor firm Artradis Fund Management Pte. The then Singapore-based hedge fund firm saw assets swell to just about $5 billion in 2008, bolstered by profits from bets on market routs and bank troubles, only to later fall victim to a turn in markets brought on by unprecedented central bank intervention.
“The variety of fault lines on the market today are greater, and the possibilities of something going fallacious are significantly greater, but risk prices have come down,” Diggle said, drawing comparison with conditions under greater than a decade of easy monetary policies. “So we’re form of in an identical situation to where we were in 2005 to 2007.”
Among the many potential flash points are the stretched valuations of US stocks, the country’s prime office market glut, elevated federal debt and tight credit spreads. A latest “bull market generation” of traders who entered the industry after 2008 have driven a small group of US technology stocks and crypto to dizzying heights, Diggle said. Meanwhile, it’s cheaper to purchase instruments to guard against routs, he added.
Elsewhere, he cited mounting geopolitical tensions and China’s shadow banking woes. Retail punters, the growing might of passive investment funds and high frequency traders will likely exacerbate routs, like they did in March 2020 and August 2024, Vulpes said in a marketing document for the brand new fund.