Volatility adds interesting dynamic to portfolio investments

Carefully trading volatility


Volatility arbitrage funds successfully protected investors from the sharp losses in mainstream asset classes, and also other hedge funds, through the turbulent months of 2008.

They made 3.2% in 2008, according to Newedge’s Volatility Trading index of 10 volatility funds, versus a 43% slump in global shares and a 19% fall by hedge funds, according to Hedge Fund Research.

However, volatility-based fund managers say their outperformance should not earmark them as only ‘portfolio insurance’: useful w