Tail risk gets investors in a spin


Tail-risk strategies are akin to insurance – something that should pay off big-style when there is a major market event

By Neil Wilson

With the ongoing political and economic crisis in the Eurozone putting the markets back in a panic, it is not surprising there has been such a surge of interest in so-called ‘tail risk’ hedging strategies – whether offered by investment banks or, increasingly, by hedge fund groups.

Volatility and tail-risk strategies together still represent only a tiny proportion of total assets in hedge funds, but they have clearly been much more on the radar screen for investors ever since the credit crunch and ensuing financial crisis of 2008. However, whether – and/or