Tail risk ETFs see sharp gains as U.S. stocks fall amid investor anxiety over banks

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Shares of exchanged-traded funds focused on tail risk were moving higher Wednesday amid rising worries over the banking sector.

The Simplify Tail Risk Strategy ETF CYA was up 4.6% Wednesday afternoon, while the Cambria Tail Risk ETF TAIL gained 3.4%, according to FactSet data, at last check. Both ETFs are actively managed.The Simplify Tail Risk Strategy ETF CYA was up 4.6% Wednesday afternoon, while the Cambria Tail Risk ETF TAIL gained 3.4%, according to FactSet data, at last check. Both ETFs are actively managed.

The prospectus for the Simplify Tail Risk Strategy ETF says the fund “seeks to provide income and capital appreciation while protecting against significant downside risk.” Cambria says on its website that its Tail Risk ETF is “designed to be a hedge against market declines and rising volatility,” so it expects the fund to see losses in most years when markets are going up or volatility is falling.

U.S. stocks were sharply lower Wednesday, as investor worries over the banking sector broadened after the chairman of Saudi National Bank told Bloomberg News that it would not provide further financial support for Swiss bank Credit Suisse Group CS . Saudi National Bank is a top shareholder in the bank, according to a Bloomberg report Wednesday.

The Dow Jones Industrial Average DJIA was down 1.8% Wednesday afternoon, while the S&P 500 SPX fell 1.6% and the Nasdaq Composite COMP declined 1%, FactSet data show, at last check. Meanwhile, Treasury yields were tumbling, with the yield on the two-year Treasury note TMUBMUSD02Y down 32 basis points at around 3.89%.

 

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