Derivatives Are Replacing Bonds as Some Fund Managers’ New Hedge
- Specialists like Ardea, Capstone gain institutional clients
- Bonds seen as more risk than risk mitigation: Universa
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Derivatives helped trigger some of the most disastrous episodes in the history of finance. Now risk-averse institutional investors are increasingly turning to them for protection amid a perilous time for global debt markets.
All manner of complex solutions, from put options to receiver swaptions, are gaining traction as a way to overcome the drawbacks of bonds as a hedge after debt failed to insulate portfolios at key moments last year. Throw in the glaring threat of fixed-income losses as the economy rebounds, and the likes of pensions, university endowments and sovereign wealth funds are tapping asset managers specializing in derivatives to help solve these woes.