Saturday, 30 August 2014
Last updated 1 day ago
Nov 3 2008 | 11:18am ET
Betting on the highly improbable paid off for invesotrs in one hedge fund last month.
Universa Investments, the $2 billion hedge fund founded by New York University risk engineering professor Nassim Nicholas Taleb, did something that seems impossible for funds that keep 90% of their assets in cash: post triple-digit returns. The firm's Black Swan Protection Protocol funds made between 65% and 115% last month, according to The Wall Street Journal.
How? Taleb's strategy of buying way out-of-the-money put options—in this case, on American International Group, which was effectively nationalized in September. In July, Universa bought AIG options that would pay off if the stock fell below $25 for $1.29 each. AIG, which traded at $26 in July, sunk below the magic number in early August before completely collapsing in September before the government bailout. Universa eventually sold its puts for $21 apiece.
Universa also benefitted from betting against the Standard & Poor's 500 Index in late September, buying options that would pay off if the index fell to 850 by the end of last month. By Oct. 10, when the S&P 500 had fallen below 900, the options were selling for $60 each.
Taleb, whose book The Black Swan discusses the effect of highly improbable events on financial markets, consults for Santa Monica, Calif.-based Universa, which is run by Mark Spitznagel.
Aug 25 2014 | 11:21am ET
As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…
Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...