After experiencing more than a decade of relative calm, market volatility appears to have returned.

Recently, former hedge fund manager Steve Diggle, who made billions during the global financial crisis, is preparing for market uncertainty.

According to Bloomberg, his family office Vulpes Investment Management plans to seek up to 0.25 billion USD in investments in the first quarter of this year to address the current risky market environment.

This funding will be used to establish a new hedge fund and manage Accounts, aimed at generating significant returns during market crashes and profiting from long and short trades in stocks during calmer periods. Diggle believes that the threats to the current market stability have reached their highest level since 2008.

Diggle's strategy: to leverage AI to capture opportunities.

Previously, he shut down his former company, Singapore-based hedge fund Artradis Fund Management Pte, in March 2011. Artradis peaked in 2008, with its asset size swelling to nearly 5 billion USD due to successful bets on market crashes and the banking crisis. However, as central banks intervened in the markets like never before, the market landscape changed, and Artradis ultimately could not escape its decline.

Diggle stated that the establishment of the new Fund is derived from an AI model developed by the company.

The model is capable of reading a vast amount of public information to help identify companies in the Asia-Pacific region that are likely to encounter problems, which may involve high leverage, asset-liability mismatches, or even direct fraudulent activities. The new Fund's stock investment portfolio will also include bullish individual stocks or indices.

Previously, he closed his former company—Singapore-based hedge fund Artradis Fund Management Pte—in March 2011. Artradis peaked in 2008, with its assets swelling to nearly 5 billion USD due to successful bets on market downturns and banking crises. However, as central banks intervened in the market unprecedentedly, the market landscape changed, and Artradis ultimately could not escape hardship and declined.

Diggle drew a parallel between the current market environment and that of 2005 to 2007. He pointed out:

"There are more hidden dangers today than in the past, and the likelihood of problems is significantly greater, yet risk pricing has decreased."

He believes that this situation is similar to the environment under loose monetary policy over the past decade. High valuations in the USA stock market, an oversupply in the Commercial Property market, rising federal debt levels, and tightening credit spreads are all potential risk points.

In addition to economic factors, Diggle also mentioned that geopolitical tensions could trigger market volatility.

Furthermore, the rise of retail investors, passive investment Funds, and activities of high-frequency traders could exacerbate market turbulence, similar to the situations in March 2020 and August 2024.

"Everyone needs to reconsider their hedging strategy."

Diggle was once the head of several teams at Lehman Brothers Holdings, and in 2001, he co-founded Artradis with Richard Magides. On the eve of the financial crisis, his company used OTC Options and variance swaps to bet on increased security volatility.

Artradis also once held credit default swaps (CDS) with a notional value of over 8 billion USD to hedge against the risks of banks failing to meet their obligations while also betting on the poor risk management of these banks.

After Lehman Brothers filed for bankruptcy in September 2008, the CDS settlement price for Lehman Brothers was 367 times higher than when Artradis purchased them, while equivalent instruments from UBS Group yielded approximately 20 times the return.

The 60-year-old Diggle will no longer participate in daily trading but has chosen to provide advice on overall risk management related to volatility. The main portfolio manager of the new Fund will be Robert Evans, who has worked at Citigroup and other companies.

Diggle stated, "It is foolish to assert that the market will certainly crash in 2025 because it involves human behavior." However, he emphasized:

"Everyone needs to start reconsidering their hedging strategies."

Editor/lambor