Investors protect funds despite pre-Lehman low for 'fear index'

Fund managers are snapping up cheap portfolio insurance ahead of an expected market pull-back, after the VIX index hit pre-recession lows in March.

There is already evidence volatility is about to return to the markets, with global indices all reporting losses towards the end of last week as muted economic news emerged from Europe and the US. US markets fell after minutes from the latest Federal Reserve meeting revealed the chances of a third round of monetary easing have waned significantly. Meanwhile, yields on Spanish 10-year bonds soared to 5.7% after a €2.6bn auction met with weak demand. Managers said investors were too complacent in the first quarter, in which equity markets rallied and the FTSE 100 touched 6,000. Tony ...