A former hedge fund manager, Steve Daigle, is preparing to capitalise on volatility in the financial markets, citing an alarming level of threats to market stability reminiscent of the global financial crisis of 2008. Through his family office, Vulpes Investment Management, based in Oxford, UK, Daigle is looking to raise up to $250 million from investors as early as the first quarter of the upcoming year.
Daigle's previous venture, which operates under the same name, saw its assets reach an impressive $3 billion during the tumultuous market conditions of 2007 to 2008. In a recent phone interview, he disclosed that the new hedge fund and managed accounts aim to generate substantial returns during market downturns, while also allowing for profits from strategic bets on stock fluctuations during less volatile periods.
The impetus for establishing this new fund arose from the development of an advanced model that utilises artificial intelligence to analyse extensive amounts of publicly available information. This model, according to Daigle, has enabled the firm to identify companies within the Asia-Pacific region that are at high risk of financial failure, pinpointing concerns such as excessive leverage, mismatches between assets and liabilities, and possible fraudulent activities. The investment strategy will include a mix of individual stocks or stock indices as bullish positions.
Daigle is now placing a significant emphasis on volatility trading following the closure of Artradis Fund Management Pte., his previous hedge fund, in March 2011. This firm, based in Singapore, enjoyed rapid growth that saw its assets increase to nearly $5 billion in 2008, driven by successful strategies that capitalised on market chaos. However, it ultimately succumbed to changing market dynamics, attributed in part to an unprecedented level of intervention from central banks.
“The number of fault lines that exist today is greater, and the chances of something going wrong are much greater, but the price of risk is lower,” Daigle remarked, drawing parallels between the current market environment and conditions that prevailed from 2005 to 2007. He identified several potential sources of volatility, including inflated valuations in the US stock market, an oversupply in the prime office market, mounting federal debt, and tightened credit spreads.
Daigle also pointed to the influence of a new cohort of traders who have entered the market since the last crisis, which has led to substantial gains for a select group of US technology and cryptocurrency stocks. He further noted that the costs associated with acquiring tools to manage volatility have significantly decreased, making it more accessible for investors.
In addition to market-related risks, Daigle highlighted external factors such as escalating geopolitical tensions and issues inherent in China's shadow banking system. He expressed concern that individual investors, the increasing dominance of passive mutual funds, and high-frequency trading could exacerbate market fluctuations, akin to the disruptions witnessed in March 2020 and August 2024.
With the launch of this new initiative, Vulpes Investment Management is poised to tap into emerging market dynamics, leveraging artificial intelligence and a strategic understanding of volatility to navigate the challenges and opportunities that lie ahead in the financial landscape.
Source: Noah Wire Services