A top hedge fund manager who has returned 47% this year has a warning for the market.
Diego Parrilla, who heads the $450 million Quadriga Igneo fund, said this week that unprecedented monetary stimulus is fueling asset bubbles and corporate debt addiction, making interest rate hikes impossible without a total economic crash
In this environment of mini-bubbles, Parrilla has focused on cheap assets poised to outperform when the bubbles burst.
At the top of his list: Gold. And Parilla says the shiny yellow metal can rise to $3,000 to $5,000 an ounce in the next three to five years – 65% to 175% above the current price of $1,813.50.
“What we’ve seen over the last decade is the transformation from risk-free interest to interest-free risk, and what this has created is a global series of parallel synchronous bubbles,” Parilla said. “What you’re going to see in the next decade is this desperate effort, which is already very obvious, where banks and government just print month and borrow, and bail everyone out, whatever it takes, just to prevent the entire system from collapsing.”
According to Parilla, stimulus packages have exacerbated deeper issues in the financial system, including central banks who have kept interest rates near zero for more than a decade and are willing to re-write their policy rule books whenever needed.
This scenario has created a bubble in fiat currency, making gold “the clear anti-bubble in this system,” Parilla said, adding that it’s “a case of when, not if,” the metal moves “significantly higher.”
Roughly half of the Quadriga Igneo fund is around 50% invested in gold and precious metals, with 25% in Treasuries and the rest in a “super explosive” corner of Parilla’s portfolio, which consists of options strategies set to profit from market chaos, such as calls on gold and the U.S. dollar.
The value of his defensive portfolio has jumped as fears surrounding the coronavirus have swept the market. Gold, meanwhile, is up 19% so far this year, rising to a level not seen in a decade, thanks to all the uncertainty in the market.