Multi-asset managers seek shelter from 'tail risks' as VIX rebounds from lowest level since 1993

Volatility hits 23-year lows

Multi-asset managers have been bolstering protective strategies in a bid to shield portfolios against future 'tail risks', suggesting markets may have become too complacent as the VIX or 'Fear' index only recently rebounded from two-decade lows.

Global volatility measures recently perplexed investors by falling to their lowest levels since 1993. In the US, the CBOE Volatility index (which tracks traders' expectations of volatility on the S&P 500 for the coming 30 days) fell to a low of 9.58. A number of factors have been suggested behind recent low levels, including the distorting influence of the rise of smart-beta strategies, central bank intervention and the fact individual stock correlations have been falling. Managers also believe investors may have become too complacent about market and geopolitical risks, although they...