Are there signs of danger in the U.S. stock market? The veteran who correctly bet on market volatility in 2008 is returning.

Former hedge fund manager Steve Diggle, who made billions of dollars by betting on the market crash during the global financial crisis, is returning to the market. He is preparing to once again seize opportunities in market fluctuations, as he believes the threats facing market stability have never been seen since 2008. Diggle's family wealth management firm, Vulpes Investment Management, stated in a phone interview that the company plans to raise $250 million from investors in the first quarter. Diggle's company made $3 billion between 2007 and 2008, and he is currently raising funds for a hedge fund and managed accounts aimed at getting high returns in market crashes and profiting from betting on stock movements during calm market periods. After developing a model that uses artificial intelligence to read large amounts of public information, the idea of creating a new fund emerged. Diggle said it helped identify companies in Asia-Pacific that were highly likely to go bankrupt due to high leverage, asset-liability mismatch, and even outright fraud. The stock investment portfolio also includes betting on single stocks or indices. "There are more fault lines now, with a much higher likelihood of problems emerging, but the price of risk has come down," Diggle said, comparing the current situation to the period of loose monetary policy over a decade ago. "So, our situation is somewhat similar to 2005 to 2007." Potential triggers include overvalued U.S. stock markets, oversupply in the U.S. prime office real estate market, rising federal debt, and tightening credit spreads. Diggle noted that a new generation of "bull market traders" entering the industry since 2008 have pushed some U.S. tech stocks and cryptocurrencies to dizzying heights. He added that tools for hedging against a collapse are now cheaper. In other aspects, he mentioned escalating geopolitical tensions as issues. Diggle's company stated in a marketing document for a new fund that retail investors, growing passive investment funds, and high-frequency traders may exacerbate collapses, as they did in March 2020 and August 2024. In March 2011, after his former company Artradis Fund Management Pte closed, Diggle entered the volatility trading arena on a large scale. In 2008, the Singapore-based hedge fund company profited from betting on market crashes and banking issues, growing its assets to nearly $5 billion, but later became a casualty of unprecedented central bank intervention in market shifts. Diggle had previously led multiple teams at Lehman Brothers Holdings, and co-founded Artradis with Richard Magides in 2001. Before the financial crisis erupted, his company bet on the surge in securities volatility using over-the-counter options and credit default swaps purchased from banks. Artradis also accumulated over $8 billion in notional value of credit default swaps (CDS) from banks that sold it tail risk derivative products. Part of it was used to hedge the risk of banks failing to meet obligations in a market downturn, while part was betting on inadequate risk management by banks. Diggle stated that the settlement price of Lehman Brothers CDS was 367 times the price paid by Artradis after filing for bankruptcy in September 2008, while the return on UBS's similar instruments was around 20 times. Purely volatility betting hedge funds often incur losses on quieter market days. Since the collapse of Artradis, Diggle's family office has invested in avocado orchards in New Zealand, real estate in Germany, a biotech company in the UK, and stocks that could benefit from European rearmament after the outbreak of Russia-Ukraine war. Diggle said that while Vulpes occasionally engaged in volatility trading over the years, it did not make a serious effort before, partly due to the lack of trading opportunities to offset such losses. The capital structure arbitrage trades used by Artradis in the early years to subsidize tail risk betting losses have now become less profitable. At the age of 60, Diggle will no longer engage in daily trading and will instead provide advice on overall risk management for the volatility portion. Robert Evans, who previously worked at Citibank and other companies in Singapore, will serve as the main portfolio manager for the fund. Diggle said, "Trying to say the market will definitely crash in 2025 is a foolish game because it is human nature. However, everyone needs to reconsider hedging."