worse than 2008? Beyond the AI bubble, a new fund backed by “big short” Bury targets private equity credit risk

The Zhitong Finance App learned that while Wall Street was busy searching for signs of a bubble in AI stocks, a new hedge fund linked to the “big short” Michael Burry set its sights on another direction that might be more dangerous — private equity.

Minerva Investment Management, a shorting strategy fund managed by Lax Ganapati, has hired Bury as a senior advisor. The fund is looking for shorting targets in industries such as healthcare, retail, catering, and small banking.

Ganapati said that the financing of many companies in these industries is linked to private equity credit, and they may be quietly “rotting.”

Short-selling strategy funds are usually set up in the form of hedge funds, which mainly profit when stock prices fall. Ganapati declined to disclose specific shorting targets and fund size. She said the fund will launch later this month.

“AI doesn't represent the entire market, even though it may seem like it,” Ganapati said. “For us, credit is the leading indicator and signal for judging the direction of the market.”

Worse than 2008? Private equity credit risks have surfaced

The fund targets a potential blind spot: the opacity of private equity credit may mask financial pressure on borrowers for years. The bankruptcy of American auto parts supplier First Brands, car dealer Tricolor, and British mortgage provider Market Financial Solutions highlights this risk.

“This time won't be like 2008. It's going to be much worse,” Ganapati said.

According to Fitch Ratings data, the US private equity default rate reached an all-time high of 6.3% on an annualized basis in August.

Shorting funds, Minerva bucked the trend

Minerva is entering an extremely tough sector in the hedge fund industry. According to HFR industry estimates, the number of funds focusing on shorting strategies has been reduced from 54 in 2008 to only 6 in the second quarter of 2026. This is due in large part to increased regulatory scrutiny of short positions, the severe performance environment facing short exposures, and changes in the US hedge fund reporting system.

The fanatical market at Game Station (GME.US) in 2021 highlights the risk of overcrowding and shorting: when stock price trends are out of touch with fundamentals, they may quickly crush an otherwise reasonable investment logic.

Nonetheless, Ganapati said Minerva could benefit from Bury's experience. Burry became famous for shorting the US subprime mortgage market before the 2008 financial crisis, and as a result, he became the prototype for the main character in the movie “The Big Short.”

Bury shut down his hedge fund Scion Asset Management late last year and launched the paid Substack newsletter “Cassandra Unchained” to publish his market views.

Ganapati said that an acquaintance close to Bury first introduced their acquaintance. Later, after Bury subscribed to her Substack newsletter, she took the initiative to contact Bury and eventually invited him to join Minerva.

Ganapati is also the founder of Unicus Research, a shorting research company. 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).