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The Tell

July 18, 2020, 10:26 a.m. EDT

This ‘anti-bubble’ investment could save your portfolio, says hedge-fund manager who’s returned 47% this year

‘What we’ve seen over the last decade is the transformation from risk-free interest to interest-free risk’

By Shawn Langlois, MarketWatch


KIM JAE-HWAN/AFP/Getty Images
Pure 1,000-gram gold bars.

Diego Parrilla is on the lookout for anti-bubbles.

In other words, the manager behind the $450-million Quadriga Igneo hedge fund’s investment process focuses on cheap assets poised to perform when bubbles burst.

At the top of the list: Gold.

“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 told Bloomberg News in an interview posted on Wednesday in which he said he believes gold (NYM:GC00) could hit $5,000 an ounce within five years.

About half of his fund is invested in gold and precious metals, according to Bloomberg News, with 25% in Treasurys and the rest in a “super explosive” corner of his portfolio, which consists of options strategies set to profit from market chaos, like calls on gold and the U.S. dollar.

“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 money and borrow, and bail everyone out, whatever it takes, just to prevent the entire system from collapsing,” Parrilla explained.

That scenario has created a bubble in fiat currency, making gold “the clear anti-bubble in this system,” he said, adding that it’s “a case of when, not if,” it moves “significantly higher.”

Gold has already enjoyed a strong year amid all the chaos, rallying about 19% and touching on levels not seen in a decade, thanks to all the uncertainty in economies around the world.

On Wednesday, however, gold was leaning lower as the Dow Jones Industrial Average (DOW:DJIA)  , S&P 500 (S&P:SPX) and the tech-heavy Nasdaq Composite (AMERICAN:COMP) were all in rally mode thanks in part to good news on the coronavirus front.

Link to MarketWatch's Slice.