"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."
I love what Taleb stands for ... unabashed acknowledgement that it is all a gamble. Its good he has a banner year. I know me made his killing in 87 in some eurodollar futures (or something to that order) ... Wonder how he has done in between. This year is a great validation for his points.
Taleb is an interesting character. He seems quite arrogant from his books and interviews. On the other hand, he makes some very, very good points. I would love to see the equity curve. It seems like one of those 'keep 10% of your portfolio in this strategy, so that when the other 90% goes belly up, you will get big." I wonder, does technology make markets more efficient, or give funds like these access to more fat tails? Are they waiting every 10 years, or finding a fat tail a year in different markets? How do they make sure they don't miss them, if they are unpredictable? If they were predictable ... well, we would really have something, now wouldn't we?
When will you folks ever learn? It's not how much you make , it's how much you can keep and spend and how much fun you have in the process.
Could Taleb be fooled by randomness himself? Wouldn't that be ironic! Anyway, I don't understand how you can run a fund where you are 93% treasuries and 7% lotto tickets, and yet charge on the whole 100%. The fund should just go 100% lotto tickets and charge on 100% and expect investors to only put 7% in. Too bad that they would bleed to death if they did this.
if 100% of the money was in way out of the money puts the first positive quarter would wipe you out. The return on the treasuries is probably how the fund survived for 20 years. You only need to risk 10% of your equity in ridiculously out of the money puts to make a killing in a market crash, course he doesn't believe you can time the crash so he always invests for the crash
Which means that you can't just use his strategy as an insurance policy -- you have to be 100% invested in it, because you slowly bleed to death waiting for the first black swan. But what if the fat tail event is that there ARE no fat tail events for a long period of time? Well, then you just die by death of a thousand paper cuts...