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One of Britain’s leading fund managers – who oversees billions of pounds of savers’ cash and has a personal fortune of £406m – is reported to be ‘stockpiling’ insurance against a market collapse.
Over recent months an investor of unknown identity has mystified traders by taking positions in complicated derivatives that make money when American shares become more volatile.
But the investor, who was dubbed “50 cent”, after the well-known rapper and musician (and because the contracts are priced at 50 cents each) has now been identified by the Financial Times as Jonathan Ruffer.
Mr Ruffer previously ran the popular Ruffer Investment Company, an investment vehicle popular with private investors whose shares are listed on the London Stock Exchange (see below for share price performance). He handed control to portfolio managers Steve Russell and Hamish Baillie in 2012. However, he still oversees the Ruffer investment house, which manages billions of pounds in total, and is personally worth £406m, according to the most recent Sunday Times richlist.
He has previously warned that markets are expensive.
In a letter to investors last month entitled “Markets are high! (you heard it here last)” he warned that “markets, especially in the US, are once again exceedingly expensive”.
He added: “There needs to be a reason for them to fall. If the markets discern a reason, they will fall sharply.”
The derivative trades he has bought – if indeed he has been correctly identified as the owner – will make money if the Vix index rises. The Vix is a measure of volatility of the S&P 500 index, the leading measure of American markets.
Commentators say he is likely to start profiting if the Vix index reaches 20. It is currently sitting at around 10.5 – similar levels to those seen in 2007 ahead of the credit crunch. During the financial crisis the index peaked at around 60.
Pravit Chintawongvanich, head of derivatives at Macro Risk Advisor, a broker, said that the position by this one investor represents 8.5pc of such bets against the Vix index at the moment.