36 South Dips Toes Into Black Swan Waters Again

Mar 24 2011 | 1:38pm ET

Two years after closing its first "black swan" fund, London-based 36 South Capital Advisors is poised to launch another.

The firm said it would launch its Black Eyrar Fund—"eyrar" means brood of swans—within three months. The new fund will employ a strategy similar to the Black Swan Fund 36 South closed in 2009 after it returned 234% the previous year, buying long-date options in the currency, fixed-income, equity and commodity markets, Bloomberg News reports.

Why reprise a strategy, which profits from rare and unforeseen market events, so soon after shutting it?

"Option prices have come back down to the point where we believe it is worthwhile starting a fund," 36 South co-founder Jerry Haworth said.

"There is probably more financial instability in the world than we've ever seen simply because it's so interconnected."

Haworth said 36 South would target family offices, funds of hedge funds and ultra-high-net-worth individuals to invest in the fund. The firm, which moved from New Zealand to London in 2009, currently manages US$250 million, including US$100 million in a joint-venture with Reinet Fund SCA.

Haworth said he wasn't concerned that 36 South missed the most recent potential black swan, the Japanese earthquake, tsunami and nuclear crisis.

"It wasn't big enough for all the correlations across asset classes, the volatility of all asset classes, to rise in concert, but it was a risk aversion event," he told Bloomberg. "It certainly wasn't a global black swan event. It didn't contaminate all the financial markets, but it certainly remains a black swan event for Japan."

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