The global equity market rout has further to run, according to the head of a fund that’s beating 80% of peers this year and is holding onto its short bets.

“We live in a financial world which has become hooked on zero interest rates and free money,” Barry Norris, who runs Argonaut Capital Partners LLP in London, said in an interview. “I don’t see things getting good for equity investors anytime soon.”

After entering a technical bear market in June, the S&P 500 Index hovered near a two-year low earlier this month as the Federal Reserve battled to keep inflation under control. Meanwhile, Europe’s benchmark Stoxx 600 Index is down 16% this year, set for its biggest annual decline since the global financial crisis.

Norris sees all equity markets needing to fall at least another 20% or 30% until there’s any kind of bottom. His view is premised on the idea that we’re in for a decade of structurally high inflation. This makes it a ripe environment for short sellers with earnings season providing an additional boost, he said. 

“The equity markets are still distinctly overvalued,” Norris said. “Corporate profits are okay, but the fact that corporate profits are okay means that we’ve still got more to go in terms of interest-rate rises to beat inflation.”

Argonaut’s Absolute Return Fund, which has £113 million ($131 million) of assets under management and goes both long and short stocks in the U.S. and Europe, has positive returns of 18% this year, according to data compiled by Bloomberg.

Last month, the fund made money in its short book thanks to bets on companies including German battery maker Varta AG and plant-based burger maker Beyond Meat Inc., but sustained losses in its long book mainly because of “general market weakness,” according to its latest fact sheet. 

Its biggest country presence is the U.S., both on a long and a short basis. By sector, the fund had its biggest long exposure in energy, while consumer discretionary and real estate were among areas with net short positions. It had 57 short holdings and 35 long positions as of the end of September.

This article was provided by Bloomberg News.