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Digital Subscriptions > The Hedge Fund Journal > Issue 140 – Apr | May 2019 > Review: Volatility Investing Event London April 2019

Review: Volatility Investing Event London April 2019

High time for higher volatility?

2019 marked the eighth year of the Volatility Investing Events, which were launched to provide investors with access to educational sessions about the often misunderstood volatility asset class after increased interest following the global financial crisis. According to Jerry Haworth, CEO and CIO, 36 South Capital Advisors LLP, “when the 2008 meteorite hit financial markets, everything changed, and the volatility space came into its own. Correlations went haywire, investors discovered the concavity of their portfolios, and the unique characteristics of volatility for managing second order risks.”

The 2019 London event brought together a broad audience including: pension funds; asset managers; wealth managers; funds of funds; family offices; consultants; short, long and variable bias volatility managers and tail risk hedgers, from the UK, Europe, the US, Asia and Africa. The £100,000 this event raised has supported several worthwhile charities: Autism Research Trust, Coram Beanstalk and Woman’s Trust. 2019 will again see sibling events in Sydney in September and in Zurich in October/ November.

How to address tail risk?

Strategies intended to mitigate tail risk include owning fixed income bonds, trend-following or other CTAs, long/short equity funds, and various volatility strategies including tail risk. Developed market government bonds are perceived as being too richly valued to repeat their historical role as portfolio insurance. Tail risk strategies and trend-following CTAs alike are path dependent in different ways: a “slow bleed” scenario of equities losing 0.50% per month for many years might not be positive for tail risk approaches, though it could be better for trendfollowing CTAs, which now manage assets estimated at $350 billion. Conversely, a sudden pullback in stocks could cause losses for those CTAs that are trend-followers and are long of equities at present. Jeppe Blirup, Fund Manager of Copenhagen-based Alternative Equity Partners A/S, says he is happy with his current allocation to a tail risk hedge fund and that it helped keep the performance flat during the sell-off in Q4 2018. Blirup mentioned it’s important to not underestimate the benefits of tail hedging in a portfolio context as correlations are unpredictable in a downturn and tend to move up meaningfully. Long/ short equity hedge funds typically carry more equity market correlation in volatile markets than meets the eye.

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Informing the Hedge Fund Community. With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry.