“Eighteen months ago, when the cost of hedging was historically cheap, nobody wanted to buy insurance. People forgot about risk and have now been brutally reminded,” says Gross, whose risk management capabilities have been attracting an increasing number of new clients. He says that, counterintuitively, it is the hedge funds that are expecting to make huge returns from opportunities in present market conditions that should be hedging more. “The more bullish you are, the more it makes sense to give away a little of the upside to hedge in case you are wrong,” he says.
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