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.