The €12bn asset management firm Algebris Investments has launched the Algebris Tail Risk Fund, pitched as a solution to tackle market shocks.
The Tail Risk Fund – run by head of macro strategies Alberto Gallo, together with the macro team -, was launched on 1 of June with the backing of two large institutional investors.
The fund was conceived as a way to prepare for a possible shock to the financial system, after a decade of easy money and quantitative easing provided by central banks.
The fund, designed to help investors counter these shocks, will mostly have a short bias and will invest in a portfolio of hedging strategies, identifying macro risks globally and implementing convex shorts across rates, credit, equities, currencies and commodities, partially financed by a diversified carry book.
Portfolio manager Alberto Gallo commented: “Central bank loosening generated an economic recovery, but has made financial markets more fragile and binary. Lack of trading liquidity, a prolonged search for yield and proliferation of passive strategies create an environment which exacerbates tail risks.”
Davide Serra, chief executive officer & founder added: “We believe this strategy offers unique diversification benefits to investors whose portfolio may encompass more traditional, long-only investments, whilst ensuring resilient economics in stable markets to prevent excess capital depletion.”