More than 70 per cent of institutional investors around the world believe it is likely that a significant tail risk event will occur over the next 12 months.
About 15 per cent of these investors even regard such an event as highly likely, according to research by the Economist Intelligence Unit for State Street Global Advisors (SSgA).
Only 11 per cent of the 310 respondents said it was either unlikely or highly unlikely to occur.
"Many investors, hit hard by the substantial drawdowns of recent tail events, are much more wary about the course of the next tail risk event," the researchers said.
Investors' main concerns included the crisis in the eurozone, the prospect of a global or European recession and the slowdown in China, the research showed.
"Only 20 per cent of respondents are 'very confident' that they have some form of downside protection in place for the next significant event, with a further 61 per cent 'somewhat confident' of this," they said.
"However, 73 per cent of institutional investors believe that due to changes in their strategic asset allocation, they are better prepared for the next major tail risk event than they were before the start of the financial crisis."
SSgA said the research showed institutional investors were reconsidering the effectiveness of diversification.
"The research also shows that the benefits of diversification as a tail risk mitigation approach are unclear and investors are not entirely confident that they are sufficiently protected from the next event," SSgA managing director Niall O'Leary said.
Allocations to fund-of-hedge-funds have also reduced, with an average decrease of 9 per cent compared to allocation levels before 2008.
Only three tail-risk mitigation strategies have seen an increase since the global financial crisis, including managed volatility equity strategies, managed futures/commodity trading advisor and other alternative allocation, including infrastructure.
"Adoption of tail-risk mitigation strategies has been slow, although a large majority of investors now see managing this issue as an integral part of a comprehensive investment plan," O'Leary said.
The biggest challenge in allocating to tail-risk protection strategies is the liquidity of the underlying instruments, investors said.
Regulatory adherence and risk aversion also ranked high among investors' concerns.
The researchers defined tail risk as an extreme shock to financial markets that would cause returns to move more than three standard deviations from the mean of a normal distribution of investment returns.
