Ruffer, a London investment fund, has joined the league of the few benefitting from the Coronavirus lockdowns, as it gained $2.6 billion in a month.
The investment company, nicknamed “50 cent”, made the gain after involving in a series of trades amidst a sell-off caused by the COVID-19 outbreak.
Ruffer has a history of taking advantage of volatilities in the financial market; it had profited from a volatility trade during a milder bout of turmoil, a few years back. The latest development started in 2018 when the company had bought Vix derivatives contracts costing half a dollar each at the time.
In a recent report by Financial Times, while offsetting losses in March 2020, Ruffer first made $800 million from a $22 million purchase of derivatives contracts that track the Vix and profit if it rises, which typically happens as stock prices fall sharply.
The investment fund then made $1.8 billion gain from other equity, gold and credit derivatives that protected Ruffer from the financial crisis borne out of the Coronavirus pandemic. The firm, which has $23 billion under its management, saw its Total Return fund drop 0.8% at the end of the first quarter.
Ruffer’s profits had been achieved on the back of uncertainties surrounding the stock markets due to disruptions in business activities caused by the COVID-19 pandemic. Investors’ confidence has been shaken as the global economy continues to drag; with no possible vaccine in sight, things might drag till the end of the second quarter.
Nairametrics had reported that new research on vaccines might take the end of 2020 to produce a result.
This has sparked a global sell-off in the global market. In the US, S&P 500 index, an equity index that measures the stock performance of 500 large companies listed on stock exchanges in US, declined by more than 30% at its nadir.
It pushed the Vix volatility index—also known as Wall Street’s “fear gauge”—higher than levels seen during the financial crisis that occurred between 2008-2009. But Ruffer made a mouth-watering sum of $2.6 billion owing to its habit of purchasing cheap protection against sharp falls in stock prices.