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Australian tail-risk product utilises NASA data
Boutique New Zealand hedge fund manager Kenton-Dau has launched a tail-risk product for the ASX200 based on data gathered by NASA on space weather patterns.
The Australian Natural Tail-Risk Protection fund takes short positions on ASX200 futures based on signals derived from NASA satellites.
"Space weather patterns have long been known to affect performance in other industries such as aviation and power companies, [but] this is the first time the data has been used to help investors predict periods of market disruption," said Kenton-Dau, principal Branton Kenton-Dau.
"Because space weather patterns show when the markets are most at risk, you only have the cover when you need it. This significantly reduces the cost of carry, and can actually increase returns," said Kenton-Dau.
Kenton-Dau Sydney representative John Coombe noted that the ASX200 Total Return Index lost 50 per cent of its value during the global financial crisis, and is still 20 per cent away from its 2007 peak.
"While internationally investors can hedge with volatility derivatives to partly protect themselves, to my knowledge this is the first tail-hedge product custom designed for the Australian investor," Coombe said.
Fund managers can either subscribe to the NASA signal for a monthly fee or have the service managed for them, said Kenton-Dau.
"[The Australian Natural Tail-Risk Protection fund] fills a gap in the market and it is effective. No one wants to experience the consequences of being without insurance when the next black swan lands," Kenton-Dau said.
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