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(Illustration by Graham Roumieu) |
Richard (Jerry) Haworth thought of himself as something of an investment maverick when he started his first tail-risk fund. Haworth and his friend Richard Hollington were both South Africans who had traded derivatives since 1987, but by 2001 they wanted to isolate themselves from herd thinking. So the pair headed for Auckland, New Zealand, near the bottom of the Southern Hemisphere. There they started 36 South Capital Advisors, a hedge fund specializing in trades that moved against equity markets, such as volatility, gold and inflation hedging.
In January 2008, Haworth and Hollington went further by launching the 36 South Black Swan Fund. The Auckland region has wetlands where black swans — scarce or nonexistent elsewhere — outnumber white ones, but the fund’s name referred to rare and unpredictable events that shatter financial markets. A black-swan strategy aims to protect investors against extreme tail...