Spectre of tail risk haunts hedge fund investment decisions
Tail risks are present. Financial asset price inflation, caused by ultra-loose central bank monetary policies, is affecting markets and could result in multiple tail risk events in 2013.
Garth Friesen, III Associates
Asset price inflation is driving the expected real returns for fixed income markets to multi-generational low levels. Higher-than-expected inflation has the ability to erode returns even further. It is not a comforting fact that the inflation swaps market is now pricing forward inflation at the highest levels since the 2008 financial crisis.
By most definitions a tail event is something that has a dramatic adverse effect on markets that participants could not or did
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