Michael Burry, the hedge fund manager who predicted the housing boom, returned 472% in the eight years he ran his hedge fund, Scion.
But surprisingly, instead of getting flooded with calls in 2008, he told Bloomberg Risk Takers that he didn’t get a single call.
Of course, Burry got the last laugh when his risky mortgage bet paid off – at first. Then no one called to invest in his fund, which is unusual for a hedge fund manager who just predicted a market anomaly. John Paulson’s hedge fund, by contrast, has ballooned with investors who want to place their money with him since he made a similar bet.
Burry was saddened by this, said a former Scion employee on Bloomberg Risk Takers.
In on of his last letters to investors in 1Q 2008, he send investors the photo below, along with this story:
Earlier this month, I took my family on our first extended vacation far away from California, and we ran headlong into a flock of black swans. Real, breathing black swans. You’ve got to be kidding me. One cannot make this stuff up. Or so I thought.
But, of course, this was indeed predictable. We were visiting Leeds Castle in Kent, England, and if I had done the work, I would have known about the flock of black swans that reside at this castle. And that is about how I view Mr. Taleb’s premise of the Black Swan. I have found markets to be anything but random, and I find many of the future events that are bound to be dismissed as random or explainable only in hindsight in fact can be foretold in time with the rhythm of history. If one does the work.
An earlier letter to investors in 2007 said:
A black swan of course is a term coined by Nassim Taleb for an extremely rare market event that no one predicts before it happens. The photo and the whole “black swans cloud my skies” might have been a little bit too in-your-face for investors who still felt mistreated by Burry, especially because it probably took some effort to find a pair of black swans to pose with.
Today he seems genuinely happy investing just for himself, so it’s just as well.
Note: In an earlier version, we said that Burry sent the above photo to investors in 2007. He did not and we apologise for the error. It was a misunderstanding based on what we learned in a TV episode about Burry.