--- title: 9 Hedge Fund Strategies Capturing the Market Sell-off description: It’s been a crazy fast sell-off in equity markets in the wake of the Coronavirus/COVID-19 pandemic. Our day jobs analyzing Long Volatility, Tail Risk, Crisis Period Performance strategies have us fielding lots of calls asking who capturing this market sell-off. image: https://info.rcmalternatives.com/hubfs/9%20Hedge%20Fund%20Strategies_Cover.png --- [![](https://info.rcmalternatives.com/hs-fs/hubfs/RCM%20alternatives_blue-2.jpg?width=3035&height=1403&name=RCM%20alternatives_blue-2.jpg)](http://www.rcmalternatives.com/) Call Us: 312-870-1500 # 9 Hedge Fund Strategies Capturing the Market Sell-off ### It’s been a crazy, insane, fast sell-off in equity markets in the wake of the Coronavirus/COVID-19 pandemic. While the human tragedy is top of mind, our day jobs analyzing Long Volatility, Tail Risk, Crisis Period Performance strategies have found us fielding lots of calls asking who is doing well during this market sell-off. The short answer is: active long volatility managers; and we’ve assembled a list of 9 who are going up while the market has been going down (past performance is not necessarily indicative of future results). ![Capture-229](https://info.rcmalternatives.com/hs-fs/hubfs/Capture-229.png?width=575&name=Capture-229.png) What you'll find inside: - Why Long Vol is the most direct hedge available in the Alts toolbox these days - What Convexity is and how it works. - Managers across Vol Arb, VIX, Global Macro and Tail Risk - 3 mutual funds using bits of these strategies - Why Gold and Bonds have issues as diversifiers ### Meet The Hedge Fund Strategies --- # What do these hedge fund strategies do?  They employ dedicated, active, long volatility strategies. Otherwise known as tail risk or convexity strategies. *Active* long volatility strategies look to profit from a market sell-off; like the 2020 stock market crash. They don’t rely on their portfolio eventually becoming negatively correlated to stocks (ehh hemm *Managed Futures*). They don’t rely on their historical negative correlation to stocks like Gold and Bonds. And they don’t rely on just being statistically non-correlated (the absolute return bucket). They actively set up their trades and portfolios to make money (at an increasing rate – what we call convexity) when the market sells off.  The simple example to this is buying Puts, which payoff when prices fall – not because that’s what’s always happened, but because that’s how the investment is actually structured. It can’t *not* make money when the market falls. More advanced examples of being long and short VIX futures at the same time – the long portion typically in the front months where volatility spikes most, and the short portion being in the back months which don’t spike as much – and erode similarly to help pay for the long exposure. The trick with this type of strategy is being able to limit the cost of owning this long volatility exposure. In the owning Puts example, you would have to pay the premium month after month *until* the markets move down past your Puts. That gets expensive and is essentially the reason you see the long VIX ETFs lose money month after month. The professional managers in this strategy use several methods to limit this bleed, including many different flavors and methodologies in and around the aforementioned long/short VIX strategy, the use of cheaper proxies to own Put options on stock down moves (like Bonds or Gold as an invesment), and the use of short-term down capture strategies which use different flavors of volatility breakout type models to try and capture short term sell-offs. ©2020 RCM Alternatives, Licensed Managed Futures, Trading System & Commodity Brokers. All Rights Reserved. [Legal & Disclaimers](http://www.rcmalternatives.com/disclaimer/) | [Privacy Policy](http://www.rcmalternatives.com/privacy/) IMPORTANT RISK DISCLOSURE The risk of loss in trading commodity futures contracts, whether on one's own or through a managed account or pooled ‘fund’, can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain a position in the commodity futures market . Any specific investment or investment service contained or referred to in this website is intended for accredited investors only and is not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments. Finally, the ability to withstand losses and to adhere to a particular trading program or fund in spite of trading losses are material points which can adversely affect investor performance. Past performance is not necessarily indicative of future results.