Black Swan Funds Said to Soar as Europe Crisis Deepens

[marmar]

(Bloomberg) Hedge funds created to protect investors against market shocks in the wake of the biggest recession in seven decades are soaring as Europe’s intensifying debt crisis infects markets globally.

Saba Capital Management LP’s $550 million so-called tail risk fund has gained 11.5 percent in September after increasing 15 percent last month, according to a person with knowledge of its performance. Pine River Capital Management LP’s $160 million tail fund advanced 14.5 percent in August, an investor familiar with the returns said. They asked not to be identified because the results are private.

Hedge funds have lost 4.8 percent since July 30 on growing concern that Europe’s leaders will fail to stem a crisis of confidence that has sent borrowing costs of nations from Greece to Italy to euro-era records. Saba, founded by former Deutsche Bank AG credit trader Boaz Weinstein, gained as junk bonds had their biggest monthly losses since the months after Lehman Brothers Holdings Inc.’s bankruptcy in 2008.

“The tail fund benefited from our focus on credit because equity just hasn’t moved as much proportionally,” Weinstein said. “This is not altogether surprising considering the level of fear and uncertainty related to sovereign and bank solvency.” .........(more)

The complete piece is at: http://www.bloomberg.com/news/2011-09-14/black-swan-hedge-funds-are-said-to-jump-as-europe-debt-crisis-intensifies.html