The trader who made billions in 2008 returns to bet on market changes


(Bloomberg) — A former hedge fund manager whose firm made billions during the global financial crisis is ready to attack 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 seeking up to $250 million from investors as early as the first quarter, the Oxford, U.K.-based investor said in a phone interview.

Diggle, whose company made $3 billion between 2007 and 2008, is raising money for a hedge fund and manages accounts designed to generate sizable returns in market downturns and profits from bets on rising and falling stocks in calmer periods. .

The idea to start the new fund came about after the company developed a model for using artificial intelligence to read large volumes of public information. It helped detect Asia-Pacific companies with a high probability of blowing up, due to risky behavior such as high leverage, an asset-liability mismatch or even outright fraud, Diggle said. The stock portfolio will also hold individual stocks or indices as bullish bets.

Diggle is making its biggest push into volatility trading, following the March 2011 closure of its predecessor company, Artradis Fund Management Pte. Ltd. The assets of the then Singapore-based hedge fund firm rose to nearly $5 billion of dollars in 2008, fueled by profits from bets on market crashes and banking problems, only to fall victim to a market reversal brought on by unprecedented central bank intervention.

“The number of failures that exist today is higher, and the chances of something going wrong are significantly higher, but the prices of risk have gone down,” Diggle said, comparing conditions to the conditions of more than a decade of policies. flexible monetary. “So we are in an analogous situation to the one we were in between 2005 and 2007.”

Potential flashpoints include inflated valuations of U.S. stocks, oversupply in the country’s prime office market, high federal debt and tight credit spreads. A new “bull market generation” of traders who entered the industry after 2008 has taken a small group of US crypto and technology stocks to dizzying heights, Diggle said. Meanwhile, it is cheaper to buy instruments to protect against defeats, he added.

Elsewhere, he cited rising geopolitical tensions and China’s shadow banking problems. Retail bettors, the growing power of passive investment funds and high-frequency traders will likely exacerbate the losses, as they did in March 2020 and August 2024, Vulpes said in a marketing document for the new fund.

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