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Abstract
Having been caught out by the ferocity of the financial crisis, investors are now much more aware of the risks of extreme events -- and the fact they seem to occur a little more frequently than many had thought. This change in perception has led to an increasing interest in a new generation of funds designed to perform well in times of crisis. One of the largest is Santa Monica, CA-based Universa Investments -- a hedge fund thought to have around $6 billion in assets. The company runs a series of so-called Black Swan Protection Protocol funds, which are believed to be structured separately for various clients, but are mostly run using a similar strategy -- hedging tail risk in equity markets. Despite recent chatter about the merits of tail risk funds, not everyone sees the benefit. Some market participants slyly observe that putting on tail risk protection after the recent financial collapse seems like closing the stable door after the horse has bolted.