Mon, Aug 29, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Understanding tail-risk hedges and funds - part one

Monday, July 16, 2012

Bailey McCann, Opalesque New York:

Conversations surrounding tail-risk started gaining more frequency with both investors and funds starting with the collapse of Long Term Capital Management as a result of the 1998 Russian debt default crisis. Since then, rolling crises from the 2007 "quant" crisis, to the 2008 global financial meltdown and most recently Grexit have made tail-risk hedging a hot topic. New funds, books, papers, and summits are springing up throughout the financial universe discussing tail-risk, whether it can be effectively hedged and how investors can fund the experiment. In this series, Opalesque will examine some of the more common tail-risk hedges, the funds in this space and what investors can expect.

The 10,000 foot view

Tail-risk strategies are essentially designed to perform well in the worst of market conditions. They act as insurance policies, requiring investors to pay in to a losing strategy until something bad happens. Tail-risk hedges are said to be most effective in environments where market participants see declines of at least 20%, providing much needed liquidity while the rest of their portfolio is spiraling toward the bottom. These declines are commonly known as fat-tails or black swan events. The individual strategies themselves are derived from calculating the probability of such events.

Tail-risk hedges are gaining more attention from institutional investors like public pension funds which have a mandate ......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Strategies - The 'Holy Grail' hedge fund strategy to handle a black swan the size of World War I, Hedge funds get more pushback on terms as enthusiasm for strategy wanes[more]

    The 'Holy Grail' hedge fund strategy to handle a black swan the size of World War I From IBTImes.co.uk: To illustrate a strategic gap common to today's portfolio managers, George Sokoloff, PhD, founder and CIO at Carmot Capital, proposes an interesting thought experiment – a breakdown of

  2. Institutional investors - Investors set to increase allocation to private debt, With investment income key, Richmond retirement system faces funding challenges[more]

    Investors set to increase allocation to private debt Investors are set to increase their allocation to private debt, with 60% revealing they believe the private debt market will grow over the next 12 months, according to a new study by Elian, a leading funds services provider. 41%

  3. Investing - Hedge funds snap up banks, unload Apple, Some of hedge funds' favorite stocks are finally starting to beat the market, Einhorn's Greenlight shifts positions, Treasury yield climbs to two-month high as Fischer joins hawks, 9 stocks smart investors put their money in last quarter[more]

    Hedge funds snap up banks, unload Apple From Barrons.com: Prominent hedge funds have a newfound love of big banks, and some have a distaste for shares of Apple, regulatory filings released last week show. The filings suggest that the funds have been pivoting their portfolios in recent mon

  4. Chesapeake energy seeks $1 billion loan to refinance debt[more]

    From Bloomberg.com: Chesapeake Energy Corp. is seeking a $1 billion loan as the company battered by cratering fuel prices and credit downgrades takes a step to address its $9 billion debt load. The natural gas producer hired Goldman Sachs Group Inc., Citigroup Inc. and Mitsubishi UFJ Financial Group

  5. Institutions - Nordic pension funds magnify focus on unlisted and direct investing, building up teams[more]

    From IPE.com: As bond yields remain at low or negative levels, pension funds and other institutional investors in the Nordic region are stepping up efforts to find higher returns by adding more unlisted investments to portfolios and are expanding in-house teams in order to do this, according to new