Hedging Bear Markets & Crashes with Tail Risk ETFs

Tail risk versus diversifying strategies

February 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Tail risk ETFs have achieved similar return profiles despite different portfolios
  • TAIL represents a traditional tail risk strategy, but offers limited diversification benefits
  • BTAL is more diversifying, but not more than CTAs


Although more than 3000 ETFs are trading on U.S. exchanges, the majority simply provide exposure to the stock market in various shades. Naturally, there are plenty of ETFs that track bond, commodity, or currency indexes that may diversify portfolios, but there are almost no ETFs for hedging against bear markets or crashes.

Given that investors are constantly discussing the issues of the economy and potential negative impacts on the stock market, this shortage of products is surprising. 

There are only two ETFs that focus on protecting against stock market declines with track records longer than five years, which are Cambria’s Tail Risk ETF (TAIL) and AGF’s US Market Neutral Anti-Beta Fund (BTAL). TAIL charges 0.59% and manages roughly $100 million, compared to 0.45% and $250 million for BTAL. Simplify’s Tail Risk Strategy ETF (CYA) is a third product, but was only launched in 2021. Furthermore, CYA manages $2 million of assets and is likely to be delisted as the ETF declined by more than 99% since its listing.

In this research article, we will contrast TAIL versus BTAL.


TAIL holds U.S. Treasuries and uses 1% of the assets under management per month to purchase put options on the S&P 500, while BTAL holds low-beta stocks while shorting high-beta stocks at the same time. Despite the significantly different portfolios, both strategies offered positive returns during recent times of market turmoil.

BTAL was launched in 2011 and generated positive returns in six periods where the S&P 500 declined between 3% and 24%. TAIL was listed in 2017 and generated higher returns in the market sell-off in 2018 and during the COVID-19 crisis in 2020 than BTAL, but a negative return during the bear market in 2022 (evaluate these ETFs with Finominal’s Diversification Booster tool).