(Bloomberg News) 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."

Weinstein declined to comment on his fund's specific returns. Patrick Clifford, a spokesman for Minnetonka, Minnesota-based Pine River, also declined comment.

Tail funds derive their name from the outlying points, or tails, on bell-shaped curves that forecasters use to plot the probability of losses or gains in a given market.

Hedging against improbable events was pioneered in the 1980s by traders including Nassim Nicholas Taleb, whose 2007 book, "The Black Swan," warned that bankers relying too much on probability models had become blind to potential catastrophes.

Taleb consults with Universa Investments LP, a hedge fund founded and owned by Mark Spitznagel that seeks to protect clients against black-swan events, a reference to the widely held belief that only white swans existed, until black ones were discovered in Australia in 1697.

Pine River formed its fund in June 2010 at the request of investors who wanted access to the techniques used by its primary multi-strategy fund, which gained 40 percent during 2008 and 2009. Saba started its version in November.

Other firms running the strategy include Capula Investment Management, which began a fund in March 2010 that's grown to $2 billion. It climbed more than 5 percent this month after a 5.36 percent gain in August, according to an investor familiar with the performance. The fund has risen about 11 percent this year.