According to Zhitong Finance APP, while Wall Street is busy searching for signs of a bubble in AI stocks, a new hedge fund associated with "Big Short" Michael Burry has set its sights on another potentially more dangerous direction—private credit.
Minerva Investment Management, a short-biased strategy fund managed by Lax Ganapathy, has hired Burry as a senior advisor. The fund is looking for short targets in industries such as healthcare, retail, restaurants, and small banks.
Ganapathy stated that many companies in these industries have financing tied to private credit, and they may be quietly "rotting." Short-biased strategy funds are typically set up as hedge funds, mainly profiting when stock prices fall. Ganapathy declined to disclose specific short targets and the fund's size. She said the fund will launch later this month.
"AI does not represent the entire market, even though it looks like it does," Ganapathy said. "For us, credit is the leading indicator and signal for judging market direction."
Worse Than 2008? Private Credit Risks Emerge
The fund is targeting a potential blind spot: the opacity of private credit may conceal borrowers' financial stress for years. The bankruptcies of U.S. auto parts supplier First Brands, auto dealer Tricolor, and UK mortgage provider Market Financial Solutions have highlighted this risk.
"This time it won't be like 2008. It will be much worse," Ganapathy said.
According to Fitch Ratings data, the U.S. private credit default rate reached a record high of 6.3% on an annualized basis in August.
Short Funds Decline, Minerva Enters Against the Tide
Minerva is entering an especially harsh area of the hedge fund industry. According to HFR industry estimates, the number of funds focused on short strategies has shrunk from 54 in 2008 to only 6 in the second quarter of 2026. This is largely due to increased regulatory scrutiny of short positions, a severe performance environment for short exposure, and changes in U.S. hedge fund reporting rules.
The 2021 GameStop (GME.US) frenzy highlighted the risk of crowded shorts: when stock price movements become disconnected from fundamentals, it can quickly crush an otherwise reasonable investment thesis.
Nevertheless, Ganapathy said Minerva may benefit from Burry's experience. Burry became famous for shorting the U.S. subprime mortgage market before the 2008 financial crisis, and he also became the prototype for the protagonist of the movie "The Big Short." Burry shut down his hedge fund Scion Asset Management late last year and launched a paid Substack newsletter "Cassandra Unchained" to publish his market views.
Ganapathy said an acquaintance close to Burry first introduced them. Later, after Burry subscribed to her Substack newsletter, she reached out to him and eventually invited him to join Minerva. Ganapathy is also the founder of short research firm Unicus Research. According to the company's website, some of its key bearish targets include electric vehicle manufacturer Faraday Future (FFAI.US) and used-car retailer Carvana (CVNA.US).
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