The "Black Swan" Hedge Fund Returns Aren't So Hot

So it turns out that eveveryone and their brother are touting some new “hyperinflation” hedge fund as a followup to their “black swan” funds. Yesterday management company 36 South got some press attention for their new fund, and today The Journal wrote, again, about a Nassim Taleb protege who’s going from black swan trading to hyperinflation trading.

All this stuff makes for great marketing copy, and since recent events would seem to vindicate the Taleb crowd, they’re all jumping on the hot new trade that everyone’s talking about: Inflation! Hyperinflation, even.

Besides glomming onto the hot buzz, these guys also claim to have a pretty good track record. In reality, that’s far from clear. Two separate readers emailed us this document, showing the track record of Taleb’s Empirica Kurtosis in the early part of this decade. Remember, during this time we saw a bubble, a world-changing terrorist attack and a severe recession. As you can see, they returns are pretty meh. The funded ended up winding down several months after this.

Empiric A

Taleb defenders will probably say that “numbers” and “results” and “returns” aren’t the best way to judge him. And to some extent that’s fair, since there’s a side of him that’s just purely a philosopher. But as someone who either manages money, or lends his imprimatur to hedge funds this is reasonable. Besides, he has no problem discussing his returns when they make them look favourable.

And it seems that Taleb is willing to talk numbers when they make him look favourable, such as the recent (inaccurate) GQ UK piece, or this piece from late last year talking about how much money Universa Investments made on the collapse (presumably the author got the numbers from someone close to the fund)

Bottom line. Just because your attuned to some best-seller list ideas and have a fund with an edgy idea, it doesn’t mean you’re a money machine for investors.

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