Thursday, 27 October 2016
Last updated 11 hours ago
Mar 30 2011 | 7:40am ET
Less than a month after shuttering Artradis Fund Management, once Singapore’s biggest hedge fund, co-founder Stephen Diggle is preparing to launch a new version of his old firm’s flagship.
Diggle’s new firm, Vulpes Investment Management, will add the Asian volatility fund in May, Diggle told Asia Risk. The new fund will follow a strategy similar to Artradis’ flagship Barracuda fund, which officially stopped trading on Feb. 28, a month after Diggle and Artradis co-founder Richard Magides decided to close the firm.
“The environment is not ideal, but with a few tweaks to the process we can limit the capital burn to an acceptable rate, even if these quiet conditions continue,” Diggle said. “Being long volatility is a good hedge against market instability as market volatility goes up when markets are weak and goes up a lot when they are all weak together.”
Among the “tweaks” Diggle has made is the hiring of a chief risk officer, Rabobank’s Bert Verdicchio.
“One of the reasons we want a CRO on board is so that someone can stand outside the thing to control how much we burn in premium and help us be more targeted in what we spend our money on,” he told Asia Risk.
Still, Diggle insists that Artradis’ demise had nothing to do with poor risk management, blaming instead overconfidence in Barracuda’s strategy and poor judgment for the double-digit losses suffered last year, costing investors—by the end, mostly Diggle and Magides themselves—some US$700 million.
“We bought lots of an asset that was not performing—from a trading point of view we should have stopped earlier,” he explained. “It’s not a risk management failure. Our job was to be long volatility. Our judgment was poor, but after making a lot of money it is not surprising that we had confidence in the strategy.”
“In an environment where you can’t make money, you have to deviate from your mandate, get off the pitch or stay smaller.”
Vulpes also runs a pair of funds it inherited from Artradis: Russian Opportunities and Testudo, a multi-strategy vehicle. The firm will also serve as Diggle’s family office—brother Martin is involved, picking stocks for the Russia fund—and “will be one of the largest family offices in Asia running products for other investors.”
In addition to the Diggles and Verdicchio, Vulpes also boasts former Artradis portfolio manager Phillip von Bernstorff. All told, between Vulpes and Magides’ new ventures, about half of the 25 Artradis employees who lost their jobs will find new ones.