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Hedge-fund veteran Stephen Diggle says volatility index to stay elevated

Diggle said he's gained from the surge in volatility after buying December put options on the S&P 500 two weeks ago at strike of 2,200 as "crash protection."


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Stephen Diggle, who co-founded a fund that made $2.7 billion in the depths of the global financial crisis, said the resurgence of is here to stay as bonds and stocks are both way overvalued.

have been roiled by massive over the past week, punishing investors who were betting on an extended period of calm. Stocks slumped and bond yields surged on concern a stronger US economy will stoke inflation and push up interest rates faster than the market has priced in. The Cboe Index (VIX) surged to a more than two-year high on Tuesday. “In the short term I think can remain elevated and the as well,” said Diggle, CEO of Singapore-based family office “There have been so many persistent sellers for such a long time that the market has been seriously out of balance for a while.”

Diggle said he’s gained from the surge in after buying December put options on the S&P 500 two weeks ago at strike of 2,200 as “crash protection.”

“The lack of fundamental value in either bonds or stocks is the greatest risk,” Diggle said. “All must eventually come back to attractive value and this is a very, very long way down for both stocks and bonds. The broad economy and corporate profitability are both strong, and that’s important, but value is what provides the best support and it’s nowhere to be seen.”

Diggle set up Vulpes in 2011 after liquidating the funds at his previous company, Artradis Fund Management, when declined.

But he doesn’t plan to restart a long fund. Central bank pledges to clamp down on has smothered and there are also “still far too few” listed long-vehicles, he said.

“Most are still over-the-counter products offered by banks that in the last crisis were the epicentre of the insolvency,” Diggle said. “So if you buy a long product from a bank, you must always be worried whether they will be able to pay you if spikes enormously.”

First Published: Thu, February 08 2018. 00:21 IST