London Black Swans Plan Hyperinflation Hedge Fund

Jun 16 2009 | 2:14am ET

Not for the first time, 36 South Investment Managers is following the black swan.

The firm closed its Black Swan Fund, which posted returns in excess of 230% last year betting on interest rate cuts in New Zealand and Australia and put options in the BRIC countries, earlier this year. Now, it’s launching a fund that could do even better betting on hyperinflation, just like the hedge fund firm advised by its intellectual leading light.

Universa Investments, the Santa Monica, Calif.-based shop affiliated with Nassim Nicholas Taleb, the economist behind the “black swan” theory of highly-improbable events, is also launching a fund premised on the idea that the trillions of dollars in government stimulus money will lead to hyperinflation. Those investors without the means to get a foot in the door at Universa—that firm’s minimum investment requirement is $25 million—might want to try 36 South’s offering.

The firm’s new Excelsior Fund “stands a good chance of outperforming in an inflationary environment,” 36 South founder Jerry Haworth told Bloomberg News. The return on the new fund “could be even higher than the Black Swan Fund,” he said; the fund is designed to return five times the annual rate of inflation of France, Germany, Japan, the U.K. and U.S., if inflation exceeds 5%.

“There is a sharply increased risk of greater than 5% inflation starting from now,” Haworth said from his firm’s new home, London. “We are in the lag period between when the seeds of inflation are sown and when their off-spring, that is higher prices, are evident for all to see.”

Haworth said he would like to raise about US$100 million for the new fund, which will buy long-dated options it thinks are cheap. 36 South will be marketing the fund in the next three months, Bloomberg reports.


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