Nassim Taleb’s Fund Made $1 Billion On Monday; This Is How The Other “Hedge” Funds Did

The WSJ reports:

Universa Investments LP gained roughly 20% on Monday, according to a person familiar with the matter, a day when the market collapsed more than 1,000 points in its largest ever intraday point decline. Universa’s profits—some realized and some on paper—amounted to more than $1 billion in the past week, largely on Monday, as its returns for the year climbed to roughly 20% through earlier this week.

“This is just the beginning,” said Universa founder Mark Spitznagel, a longtime collaborator with Mr. Taleb, who advises Universa, lectures at New York University and is known for his pessimistic forecasts about the global economy. Mr. Spitznagel himself has spent the last several years warning of a coming correction, one he viewed as inevitable given accommodative policies by central banks around the world.

The markets are overvalued to the tune of 50% and I’ve been saying that for some time,” said Mr. Spitznagel.

Universa gained renown for its outsize gains in 2008, racking up more than 100% profits for many of its clients. In 2011, it notched around 10% to 30% gains for clients. During the years in between it posted steady, small losses.

The firm focuses on finding cheap, shorter-dated options on the S&P 500 and other instruments it expects to rise in value amid a notable downturn.

During the past week, the value of such options that Universa bought over the past one to two months jumped, said people familiar with the matter.

The Miami-based Universa and some other “black swan” hedge funds that seek to reap big rewards from sharp market downturns have emerged as winners amid the world-wide volatility of the past week, say their investors, racking up double digit gains in roughly the past week.

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