Risk models get harder to crack

As the best hedge fund strategy of 2023 becomes a magnet for investors, the mainstream risk models it relies on are getting a lot tougher to crack.

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The strategy in question is tied to insurance-linked securities, which are dominated by catastrophe bonds (often dubbed cat bonds). In 2023, no other asset class produced a better-performing bet for hedge funds, with firms including Fermat Capital Management and Tenax Capital booking their biggestever returns.