Fund of Funds Cuts Out Middlemen for DIY Tail Risk

Toronto-based Diversified Global Asset Management says its homegrown tail-risk strategy is cheaper than outsourcing it to third-party hedge funds – and allows the firm more control.

The financial crisis convinced many investors of the value of protecting against tail risk, the possibility of unforeseen events changing the direction of a portfolio. Over $40 billion is now invested in tail risk funds. These funds trade against the prevailing market wisdom, buying put options and other instruments that lose money when the markets are rallying but are designed to pay off by as much as 100 percent or more when markets crash — hence their post-crisis popularity.

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