HFR Unveils Long Vol Index Amid Tariff-Driven Market Turmoil 

Hedge Fund Research (HFR) has introduced the HFR Long Volatility Index, a new benchmark tracking strategies that profit from market turbulence. HFR calls it the industry’s only “pure benchmark” for long volatility strategies, which use complex portfolio trading options to achieve asymmetric gains during rising volatility. 

The launch comes amid heightened market volatility, sparked by the administration’s trade tariffs. The CBOE Volatility Index (VIX), known as the market’s “fear gauge,” hit a five-year high of 52 on April 8, as global equities lost trillions and investors retreated from U.S. bonds and the dollar. 

In the first quarter of 2025, the HFR Long Volatility Index rose 3.8%, outperforming HFR’s Fund Weighted Composite Index, which fell 0.38%. Over seven years through March 2025, the index has an annualized return of 4.2%, including a 32.7% gain in March 2020 during the COVID-19 market surge. 

Long volatility hedge funds employ strategies like tail risk trades, which target extreme market dislocations for high double-digit returns; gamma trades, using short-dated options to capitalize on realized volatility; and longer-date volatility funds, which focus on implied volatility in options with extended expirations. These strategies often face negative carry in low-volatility periods but can yield significant gains during volatility spikes. 

HFR president Kenneth Heinz described long volatility strategies as “the ideal mechanism of defensive portfolio protection and opportunistic capital preservation,” predicting increased investor interest. He highlighted the index’s role in providing powerful insights into strategies designed for periods of market stress. 

HFR is launching two versions of the index: the HFRI Long Volatility Index, covering hedge fund structures meeting HFRI methodology, and the HFR Long Volatility Index, which includes additional non-hedge fund long volatility products.