British bank notes and coins.
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An investor who once made $2.7 billion trading volatility is now betting on the British pound.
Stephen Diggle told Bloomberg he put 10% of a fund’s assets as the currency plunged.
The pound has nosedived on fears that tax cuts will fuel inflation and increase government debt.
Stephen Diggle made an astounding $2.7 billion for investors in his hedge fund by trading volatility between 2002 and 2009. He’s now betting on the British pound, after the currency tumbled to a record low of 1.04 against the US dollar on Monday.
Diggle invested 10% of the assets of a “small fund” in sterling, he told Bloomberg, without providing further details. He plans to use the currency to fund his UK investments, chiefly stocks of companies that have dollar-denominated earnings and incur most of their costs in pounds. A weak sterling makes those businesses more profitable.
The pound tanked after the UK’s new chancellor, Kwasi Karteng, detailed a slew of prospective tax cuts and hinted more were coming. Investors feared the cuts would not only increase the government debt but also fuel inflation, spurring the Bank of England to hike interest rates more aggressively and potentially drag the UK economy into a deep recession.
Diggle told Bloomberg he doesn’t know if the pound will keep sliding, but it looks inexpensive to him.
“I’m not calling a trading low. Who the hell knows?” he said. “But against a 5- or 10-year average sterling is very cheap now.”
The Vulpes Investment Management boss asserted that UK taxes are too high and likely constraining growth, and questioned whether the pound’s dramatic decline was warranted. He noted the country has a lower debt-to-GDP ratio than several other developed nations, potentially giving it room to borrow more without running into any major problems.
Vulpes didn’t immediately respond to a request for comment from Insider.
Diggle launched his hedge fund, Atradis Fund Management, with $4 million in 2002. Its assets under management peaked at nearly $5 billion in late 2008, as it capitalized on immense volatility during a period when the US housing bubble burst, markets crashed, and a global financial crisis took hold. Atradis closed its doors and returned all of its investors’ money in 2010.
The Vulpes chief is one of the handful of investors who made their names and fortunes during the financial crisis. Michael Burry of “The Big Short” fame, and John Paulson, who was profiled in “The Greatest Trade Ever,” both predicted and profited from the 2008 crash.