A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in New York City, New York, U.S., July 19, 2021. REUTERS
(Reuters) – Wall Street is busy scouring AI stocks for signs of a bubble, but a new hedge fund tied to famed short seller Michael Burry is coming to the market eyeing more consequential warnings of rising froth elsewhere – in private credit loan books.
Minerva Investment Management, a short-biased fund by Laks Ganapathi which has hired Burry as a senior adviser, is scanning sectors spanning healthcare, retail, restaurants and smaller banks for short targets.Financing of many companies in these sectors are tied to private credit and they could be quietly rotting beneath the surface, Ganapathi said in an interview with Reuters.
Short-biased funds structured as hedge funds mainly profit when stock prices decline. Ganapathi declined to name specific short targets and the size of the fund, which she said will be launched later this month.
“AI is not the entire market, even though it appears to be,” Ganapathi said. “For us, credit is the leading indicator and signal on how the market is going to be.”
The fund is targeting a potential blind spot as private credit’s opacity can mask financial strain on borrowers for years, as highlighted in the bankruptcies of US auto parts supplier First Brands, car dealer Tricolor and UK mortgage provider Market Financial Solutions.
