Hedge funds buy war insurance on Russia-Ukraine conflict

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Investment firms have sharply increased the protection they buy against macroeconomic shocks, so called "tail risk" hedging for a potential armed conflict in Eastern Europe.

"There's been an uptick in hedging activity—we've definitely seen funds add to tail hedges in case the conflict escalates," said Jon Kinderlerer, who analyzes Credit Suisse's hedge fund client portfolios as head of risk and portfolio advisory for the bank's prime brokerage division.

In February, the percentage of funds that purchased "deep downside" protection—a financial bet that would gain if there is a significant drop in global stocks—hit a two-year low of less than 13 percent. That spiked to more than 17 percent as of Monday, according to Credit Suisse data.