Long time readers know that I am fantastic with coming up with great ideas but less so at monetizing them. Anyways, here is an obvious idea (Barclay’s/PIMCO are you listening?):
Start a suite of three public mutual funds or ETFs that focus on fat tail hedging including equity, credit, and inflation(deflation) protected funds. One could also design them against other factors but these seem simplest. All they do is buy out of the money options on those asset classes. This is a perfect example of a strategy you should only be paying 50 bps for (Universa and Landmark charge hedge fund style fees). Really, all they are doing at the end of the day is buying out of the money options so why charge alpha fees? (Note: This is not the same thing as 3X inverse funds – rather, this focuses on the optionality of using derivatives so it works almost like insurance.)
PIMCO does this within their Global Multi Asset Fund (PGMAX) but I am talking about someone that breaks it out separately.
Should be tons of demand for a product (ie insurance) like this. Over/under until we see something? I definitely think < one year.