Ruffer is believed to be the mystery investor that has been buying up derivatives connected to the Vix index, indicating fears of a major market correction.
A single buyer is believed to be behind a series of trades over a number of months that always cost around $0.50 and now total $120m – approximately 8.5 per cent of the open interest in the niche area of the derivatives market, the Financial Times reports.
The nature of the trade has prompted Wall St to dub the mystery buyer 50 Cent after the US rapper – a far cry from the investment firm’s founder Jonathan Ruffer, a “committed evangelical Christian” and philanthropist committed to restoring Auckland Castle in Durham.
Ruffer declined to comment on the trades, but said in an investor presentation last year that it was purchasing volatility protection.
“We regard them as necessary for the scenario we most fear: a major correction in both bond and equity markets.”
Analysts say the strategy is a prudent piece of risk management, but could prove costly if volatility remains subdued.