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Opalesque Exclusive: 36 South Investment Managers launch `fat tail` risk management fund on HFR platform
A new risk management product for hedge fund of funds, pension funds and endowments will be launched on the HFR Asset Management platform in October. 36 South Investment Managers Limited (36 South), a “tail risk” hedge fund manager is to launch
36 South Black Swan, a product designed to provide protection for institutional fund portfolios in
significant risk aversion periods.
The product is designed to be a 2.5% allocation within a hedge fund of fund or pension fund
portfolio. In a “normal” or benign market environment, the cost to the investor’s overall portfolio is
expected to be approximately 50 basis points per annum, although this may be more or less.
In a risk aversion period, the portfolio of long-dated “out of the money” options is expected to
“fire”. A specific performance level cannot be guaranteed, however the portfolio return
contribution in risk aversion periods is targeted at 10%-15%, offsetting potential problems
introduced by long-short equity and mean-variance framework-based fund investments.
The portfolio will be built using a proprietary asset allocation process based on the 36 South
Global Implied Volatility Indices and will hold only “bought” option positions around a weighted
average maturity of five years. It will be a composite diversified portfolio with a long volatility
exposure to a mix of equities, interest rates, cu...................... To view our full article Click here
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