As coronavirus fears spark the fastest moves in stocks and bonds in decades, a black swan fund just notched its best month since the global financial crisis.

36 South Capital Advisors LLP skyrocketed to fame after posting huge returns in 2008. Now it’s gained big from the February mayhem, after spending years patiently waiting for the next cataclysm.

Preliminary Eurekahedge Pte. data show tail funds gained a modest average of around 5%. Richard “Jerry” Haworth of 36 South says his return “was more than five times that.”

With markets still convulsing on Friday, there could be more gains in store for these types of options-based strategies that benefit from volatility breakouts.

“February was our best month since 2008 and we believe the strongest performance is likely ahead of us,” said London-based Haworth, without giving a specific figure.

Early signs suggest tail-risk managers notched their best month overall since August 2015, according to Eurekahedge data that reflects 43% of funds reporting. That was enough to push them toward the top of the fund-performance tables “in what is so far turning out to be a mixed, albeit relatively palatable, month for hedge funds,” said Mohammad Hassan, analyst at the research and indexing firm.

Other winning strategies include precious metals-focused funds, short-term systematic CTAs and short-biased managers, according to Hassan. In the latter category, some famously bearish figures -- such as Russell Clark and Crispin Odey -- gained big.

Big One
But the jury’s out on whether these players are a good overall value for what they deliver. Tail funds, which manage $4.6 billion according to Eurekahedge, can charge stiff fees and deliver years of lackluster returns as investors await the big one. Whether there are cheaper or more effective ways to hedge -- like bonds or gold -- is up for debate.

Consider that a bet on long-term Treasuries in the form of the iShares 20+ Year Treasury Bond ETF delivered a 6.6% total return last month.

Tail fund and other long-volatility strategies use various techniques for reducing the eye-watering costs of holding hedges over extended periods, such as relative-value derivatives trades.

One reason for the relatively modest performance reflected in the Eurekahedge data may be that under a common definition -- an event more than three standard deviations from the norm -- last week’s market moves didn’t necessarily qualify as a tail. Though there’s an argument to be made that last week’s moves aren’t quite done.

“Tails tend to be more extreme in the distribution,” said Wayne Himelsein, president of hedge fund Logica Capital in Los Angeles. “Black Friday of ’87. The global financial crisis in ’08. Most tail risk managers will start kicking in at down 15%, 20%, 25%.”

This article was provided by Bloomberg News.