A hedge fund that has Black Swan as part of its name had a good October, the Wall Street Journal tells us. The Universa Investments L.P Black Swan Protection Protocol was up somewhere between 65%-115%. Nassim Taleb helped found the group, but it’s unclear how much involvement he really has in the fund, which — surprise! — buys deep out-of-the-money puts.
The “person close to the matter” (we’re guessing Taleb himself, but who knows) didn’t happen to tell the reporter what kind of performance the fund has had since it launched in early 2007. But since the strategy assumes the investor loses money in most months, it’s not clear if one month of 65%-115% gains is really all that much. One fund investor said the fund had “done what it was supposed to do for us”, which is provide market protection. Not the most glowing endorsement.
The Journal does note that Taleb’s own fund, the obnoxiously named Empirica Capital, shut down in 2004 “after several years of lackluster returns amid a period of low volatility.” When your strategy is to lose money most months, you can’t blow up, so much as you die a slow death.
As an aside, for a good, thorough criticism of Taleb’s out-of-the-money put strategy, see here.
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