Hedge Fund Millionaire Shuns Currencies as Dollar Stalls

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Stephen Diggle, who co-founded a hedge fund that made $2.7 billion over 2007 and 2008, is shunning currencies saying the profit readily available from wagering on the dollar’s appreciation against the euro and yen is over.

There’s been a shortage of ideas for 2015 following the greenback’s strongest rally for a decade, said the chief executive officer of Singapore-based family office Vulpes Investment Management. The millionaire, who set up the firm about four years ago after liquidating his previous company’s volatility funds, would rather add to investments in German real estate as well as fruit-and-nut orchards in Australia and New Zealand even as those local currencies weaken, he said.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 11 percent last year, the strongest gain since the gauge’s inception of Dec. 31, 2004. Forecasters see the dollar climbing 1 percent versus the euro and about 5 percent against the yen by Dec. 31, compared with a 14 percent advance against each last year.

“The easy money’s been made on the long-dollar trade,” Diggle, 50, said in an interview yesterday. “There’s been a dearth of interesting strategic advice out there. Recommending what worked last year seems like the easiest thing to do.”

Dollar Gains

Vulpes profited last year from the U.S. currency’s advance against the euro, yen and Australian dollar, Diggle said. The euro extended its drop to a nine-year low on Jan. 8 amid speculation European Central Bank President Mario Draghi will announce a quantitative-easing strategy as soon as this month. A day earlier, Australia’s dollar slumped to the lowest level since July 2009 as the economy struggles to cope with the end of a once-in-a-century resources investment boom.

Vulpes, which manages about $250 million, no longer has any trading position on currencies, Diggle said.

“I don’t see any major trend where the odds are so good that I want to take time off from doing other things to play it,” he said.

Vulpes holds dollars, euros, yen, gold and silver, which form the core of its cash portfolio, Diggle said. It also holds the currencies of Australia and New Zealand as well as the pound because it has invested in businesses in those countries, he said.

German Property

The family office plans to increase its real-estate investments in Germany, where it owns more than 1,200 apartments, drawn to the ECB’s record-low interest rates and a pickup in Europe’s largest economy, Diggle said. Vulpes is able to borrow at 1.75 percent and the properties have a gross yield of more than 8 percent, he said. While expenses are “quite high,” the return on a leveraged position remains attractive, he said.

“For us, that looks like a very good trade,” said Diggle, who previously ran Artradis Fund Management Pte, once Singapore’s biggest hedge fund. Artradis’s funds sought to profit from price swings.

Diggle, who graduated from the University of Oxford in 1986, was head of the Asian equity derivatives trading department of Lehman Brothers and ran its futures operations in Hong Kong.

His brother, Martin Diggle, is a fund manager at Vulpes, overseeing its life-sciences investments, according to the firm’s website.

Vulpes’s investments in biotechnology companies in the U.K. returned 37 percent in 2014, after factoring in the pound’s 6 percent decline against the dollar, he said.

“We are planning for and run our business for a multi-currency world, not for a uni-currency world,” Diggle said.