Making 4,000% With Tail-Risk Trades
The Universa hedge fund is up a befuddling 4,144% through coronavirus, and investors want to know the secret. The fund is run from Miami by goat farmer Mark Spitznagel, who also profiteered from the dot-com crash and housing crisis, and it’s advised by Nasim Taleb, a mathematical statistician. It sells crash insurance, basically, ‘tail-risk hedging!’
If buying gold, diversifying your stocks, and loading up on fixed income bonds still doesn’t have you feeling safe, look into tail-risk hedging. It’s the ultimate bear bet. You lose small amounts often but make huge gains whenever ‘black swan’ events come along.
Universa continuously fritters away small sums on ‘out-the-money’ short-term puts, which is like shorting the market every day to the extreme. It almost never pays off, until it does, and then an astronomic gain hopefully makes up for the little losses.
You could have invested 3.3% in Universa and put the rest of your portfolio in the S&P 500 prior to this latest crash, and you’d have broken even. It sounds great, but the catch is the fee. The trading experts for this strategy don’t come cheap. The fund charges a two percent annual headwind, no matter what direction markets take. It’s really a fear fund.
That’s why the founding father, Mark Spitznagel, wants to sign off with a forecast for the global economy. He warns of “destructive” stimulus from central banks, and says “the world remains very much trapped in the mother of all financial bubbles.” You’d be crazy not to get financial bubble-bursting insurance now! Curious?
