Steve Diggle, a former hedge fund manager who made billions during the global financial crisis, is preparing to capitalise on current market volatility with a new $250 million hedge fund.
Using his family office, Vulpes Investment Management, he is looking to raise funds as early as the first quarter of 2025 to position the firm for profit from market fluctuations not seen since 2008.
Diggle, whose previous firm made $3 billion between 2007 and 2008, has set his sights on the growing risks that could cause instability in the financial markets.
The new hedge fund and managed accounts are designed to generate substantial returns during market crashes while also profiting from more predictable stock movements during calmer periods.
The decision to start the new fund comes after Vulpes developed a model using artificial intelligence to analyze large volumes of public information.
This model helped identify high-risk companies, especially in the Asia-Pacific region that exhibited behaviors such as high leverage, asset-liability mismatches, and even outright fraud.
The fund will focus on a portfolio that combines single stock positions and index bets, both bullish and bearish, aimed at capturing returns from significant market shifts.
“The number of fault lines out there today are greater, and the chances of something going wrong are significantly greater, but risk prices have come down,” Diggle said.
He said the current market environment is similar to the pre-crisis years of 2005 to 2007 where risk was more pronounced but cheaper to hedge against.
Diggle’s push into volatility trading marks his largest effort since the closure of his predecessor firm, Artradis Fund Management Pte., in 2011.
His previous success was bolstered by profitable bets during the 2008 market meltdown, but he saw his firm ultimately falter due to the unexpected intervention of central banks.
With stretched valuations in U.S. stocks, an overstocked office market and increasing federal debt, Diggle sees an opportunity to navigate the uncertainty in today’s complex market.
As he prepares to launch the fund, Diggle is focused on sectors and regions ripe for volatility.
He would be targeting everything from U.S. technology stocks to the broader financial landscape as he believes is filled with risk in the wake of over a decade of easy monetary policies.
