New short fund taps Burry as targets US private credit risks

A new hedge fund, Minerva Investment Management, is set to launch this month with the goal of targeting weaknesses in US private credit, according to Reuters. The fund, founded by short seller Laks Ganapathi, has enlisted the help of Michael Burry, known for his short-selling success with the company that bet against the housing market before the financial crisis.

Ganapathi said the fund will examine potential short opportunities in healthcare, retail, restaurants, and smaller banks. She highlighted that financing arrangements related to private credit could expose some companies to more financial stress than what is evident from their reported results. Ganapathi did not specify which companies she believes are vulnerable.

Private credit's annualized default rate hit a record high of 6.3% in August, according to Fitch Ratings. Ganapathi believes private credit can serve as an important indicator of broader market conditions and argues that the current risks are different from those that led to the 2008 global financial crisis. The launch of Minerva comes at a challenging time for dedicated short sellers.

There are only six such funds operating in the second quarter of 2026, compared to 54 in 2008, according to HFR data. This decline is attributed to factors like challenging market conditions for short strategies, increased regulatory scrutiny, and changes in US hedge fund reporting requirements. Short sellers also face the risk of share prices moving sharply against their fundamental analysis, as seen in the 2021 GameStop trading frenzy, where retail buying caused heavily shorted stocks to experience large gains.