These are the main market risks right now, renowned hedge fund manager says

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High credit, fierce competition and stretched valuations could be potential market destabilizers, a renowned former hedge fund manager said Thursday.

Speaking to CNBC on the sidelines of the Sohn Conference in London, Sir Paul Ruddock, co-founder of Lansdowne Partners, said: "Clearly, credit is an area you've got to be concerned about. There's been a huge booming in credit over the last 10 years, fueled to a large degree by quantitative easing."

Central banks embarked on a low interest rate policy in the wake of the 2008 financial crisis and have just recently started reversing some of the measures, albeit slowly. The prolonged use of low interest rates increases people's and businesses' willingness to borrow more money because their costs are lower.

Despite the many years of low interest rates, Ruddock doesn't think the environment will change in the near future, which potentially increases the risks of high levels of credit. Quantitative easing is "still" needed, he said, "given the high level of government indebtedness' around the world."

Interest rates will go up, he added. But he cautioned: "I suspect it will be at a pretty slow rate."

At the same time, the investment climate is more difficult at the moment due to more market competition and stretched valuations, Ruddock said.

"It's a tougher environment today. It's a tough environment if you've got a headwind of rising interest rates, it's a tougher environment because competition is greater, valuations are clearly more stretched than they were seven or eight years ago."

On Wednesday, Vice President of the European Central Bank Vitor Constancio told CNBC that U.S. valuations are overstretched, which is a risk for global markets. Investors are potentially taking on too much risk and if they suddenly realize that's the case, there could be materially losses in global markets, he said.

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