Singapore-based Artradis Fund Management, co-founded in 2001 by Stephen Diggle and Richard Magides, is to shut down and return investors’ mo
Singapore-based Artradis Fund Management, co-founded in 2001 by Stephen Diggle and Richard Magides, is to shut down and return investors’ money, bringing the curtain down on one of the region’s most successful hedge funds. The decision has apparently been made following a period of losses in the last two years as market volatility subsided. The firm made long-bias volatility bets in its Artradis Barracuda Fund and leveraged counterpart, the AB2 Fund, generating enormous profits from the wild volatility swings of 2007 and 2008; the latter fund gaining +57 per cent and +35 per cent respectively. Both employed a market neutral strategy. At their peak, Artradis’s assets reached about USD4.5billion. Diggle told Bloomberg this week that investors in the A2B Fund would have their money returned by February 28th and hoped to do the same with the Barracuda Fund, although the firm is currently awaiting an investor vote to shutter the fund. Diggle confirmed that both volatility funds were “substantially in cash”. “We had seven years of profits – 2007 and 2008 were spectacular – but the last years we’ve been losing money, that’s become unacceptable to us and to our investors,” said Diggle.
Artradis traded options, warrants and convertible bonds to produce uncorrelated returns and looked to exploit price differentials between similar securities trading on different markets. When an option trader speculates on the volatility of an underlying asset and buys contracts (long volatility), he expects the future realized volatility of that asset to be higher. Post ’08, however, the markets have stabilized with Diggle admitting that there hadn’t really been many spikes in volatility in the last two years. The Barracuda Fund was reportedly down 15 per cent as of end-November last year. Diggle plans to focus on turning his family office, Vulpes Investments, into an investment management company over the coming months. As well as launching a new long volatility fund, Diggle is also expected to bring the Artradis Russian Opportunities Fund over into Vulpes Investments.