Hedge funds with investment strategies designed to generate positive returns during market shocks, tail risk or black swan funds, have been very successful in August and September. Other funds have lost 4.8% since July 30th due to the European credit crisis. The tail risk fund of Saba Capital Management has risen 15% in August and 11.5% in September. Pine River Capital Management has risen 14.5% in August. Other hedge funds that run this strategy are Capula Investment Management and Gramercy.
The VIX Index, a measure of market volatility, has doubled in the last two months. Junk bonds have lost 4% in August according to a Bank of America Merrill Lynch index and the Standard & Poor's 500 lost 5.4% for the month.
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