Singapore-based volatility hedge fund manager Stephen Diggle (pictured), who re-launched as Vulpes Investment Management after liquidating the ArtrPARA_BREAK_SENTINEL_9f8e7d6c

Singapore-based volatility hedge fund manager Stephen Diggle (pictured), who re-launched as Vulpes Investment Management after liquidating the Artradis fund earlier this year, is putting his bets on increased volatility in government debt, currency and commodity markets as the sovereign debt crisis in the eurozone and the US deepens reported Bloomberg this week. The equity markets are still range-bound and challenging in 2011, despite many non-financial firms showing strong balance sheets, as the debt challenges facing governments keep investors spooked. “The fault lines have moved away from the private sector to the public sector. These sorts of distortions are coming about principally because of government activity rather than excessive fear or greed amongst investors, which is what normally causes volatility,” Diggle was quoted as saying.

The CBOE Volatility Index (VIX), known by many as the “fear gauge”, shot up over 12 per cent to USD26.3 on Thursday 4August, almost reaching the March high when the Japan tsunami struck, as fears surround the US economy and western government debt concerns. Diggle’s long Asian volatility and arbitrage fund – LAVA – has gained 1.5 per cent since May, with Diggle adding: “I’d rather be long corporate bonds than government bonds in essence because I see private prosperity and public squalor.” Difficult to argue with that.