Black Swans No Black Sheep In August

Sep 19 2011 | 4:44am ET

August’s market volatility was certainly improbable, good news for hedge funds that bet on just such improbabilities.

So-called “black swan,” or tail-risk, funds, soared last month. Saba Capital Management’s such fund, which has some $550 million in assets, jumped 15% last month, Bloomberg News reports. The fund has added a further 11.5% this month.

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

On the other side of the Atlantic, black swan funds did even better amidst the worst month for hedge funds in years. Man Group’s Tail Profit Fund soared 29.18% and 36 South Investment Manager’s Black Orlov Fund 19.56%—bringing its year-to-date return to 94.42%, the Financial Times reports.

Another black swan hedge fund, Pine River Capital Management’s $160 million fund, added 14.5% in August. Capula Investment Management’s $2 billion tail-risk fund rose 5.36% last month and is up 5% this month, while Greenwich, Conn.-based Gramercy’s $2 billion fund is up 9.8% this month and 29% since its launch in May.

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    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…