Universa Investments

Last updated
Universa Investments L.P.
Type Private
Industry Investment Management
FoundedJanuary 2007;16 years ago (2007-01)
Founder Mark Spitznagel
Headquarters Miami, Florida, U.S.
Key people
Mark Spitznagel (President)
Nassim Nicholas Taleb (Scientific Advisor)
Products Hedge funds
Alternative investments
AUM US$19.1 billion (June 30, 2022) [1]
Number of employees
18 (2022)
Website universa.net
Footnotes /references
[2]

Universa Investments ("Universa") is an American investment management firm headquartered in Miami, Florida. It is known as a Black Swan fund that focuses on risk mitigation to protect investors from sharp market downturns. [3] [4] [5] [6] [7] [8] [9]

Contents

Background

Universa Investments was founded in January 2007 by Mark Spitznagel with Nassim Nicholas Taleb acting as its advisor. [4] [5] [7] [8] The two of them previously ran Empirica Capital, a hedge fund that closed in 2004 due to subpar returns. [4] [6] [8] Universa was launched with $300 million under management and traded out of a small office in Santa Monica, California. [4] [5] Software programs were developed to search the options markets for deals. [5]

Universa and Empirica followed the Black swan theory which was about unexpected extreme events that have significant impact on the world and the financial markets. [4] [5] [6] [7] [8] [9] The strategy would be to buy out-of-the-money put options at low prices during periods the financial markets are good to protect the firm's position when there is a market downturn. [4] [5] [6] [7] [8] [9] While this strategy did not work with Empirica due to a period of low volatility, it worked well for Universa due to the 2007–2008 financial crisis. [4] [7] [8] Universa purchased puts related to the S&P 500 Index and financial companies such as Goldman Sachs and American International Group which the firm sold for a significant profit after the prices fell. [4] In 2008, Universa had returns over 100% and its assets grew to $6 billion under management in 2009 as more investors approached Universa to provide protection to their investments. [5] [7] [8]

There was speculation that Universa purchasing large amount of puts options on the S&P 500 Index may have been one of the primary causes of the 2010 flash crash. [10]

In September 2011, Universa was stated to be raising $1 billion to start a Macro fund. [6]

On March 1, 2014, Universa moved its headquarters from Santa Monica, California to Miami, Florida to take advantage of the city’s business and tax policies. [11]

During the 2015–2016 stock market selloff, Universa had a return on 20% in August 2015 which resulted in a $1 billion gain. [7] [8]

In 2017, CalPERS hired Universa to provide tail risk hedging protection to its investments. [12] [13] In 2020, CalPERS terminated Universa's role citing it had found cheaper and better alternatives. [12] [13]

In 2018, The Wall Street Journal reported that “a strategy consisting of just a 3.3% position in Universa with the rest invested passively in the S&P 500 index had a compound annual return of 12.3% in the 10 years through February (2018), far better than the S&P 500 itself” (and portfolios with “more traditional hedges”). [14]

In March 2020, Universa, in a letter to investors, estimated it had a return of 3,612% on invested capital in its strategy due to effects caused by the COVID-19 pandemic. [15] [16] [17]

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References

  1. ↑ "Managers see growth in year ended June 30". Pensions & Investments. 13 September 2022.
  2. ↑ "Form ADV" (PDF). SEC.
  3. ↑ "Black Swan Fund Manager Sees 'Tinderbox-Timebomb'". Bloomberg.com. 2023-01-30. Retrieved 2023-03-15.
  4. 1 2 3 4 5 6 7 8 Patterson, Scott (3 November 2008). "October Pain Was 'Black Swan' Gain". Wall Street Journal. Retrieved 2023-03-15.
  5. 1 2 3 4 5 6 7 Patterson, Scott (18 June 2009). "Black Swan Trader Bets Reputation on Inflation". Wall Street Journal. Retrieved 2023-03-15.
  6. 1 2 3 4 5 "Black-Swan Investor Universa Said to Start $1 Billion Macro Fund". Bloomberg.com. 2011-09-27. Retrieved 2023-03-15.
  7. 1 2 3 4 5 6 7 Chung, Juliet (28 August 2015). "A 'Black Swan' Fund Makes $1 Billion". Wall Street Journal. Retrieved 2023-03-15.
  8. 1 2 3 4 5 6 7 8 "Mark Spitznagel beats drum for tail risks as markets stall". Financial Times. 2016-05-16. Retrieved 2023-03-15.
  9. 1 2 3 Gara, Antoine. "How A Goat Farmer Built A Doomsday Machine That Just Booked A 4,144% Return". Forbes. Retrieved 2023-03-15.
  10. ↑ Lauricella, Scott Patterson And Tom (10 May 2010). "Did a Big Bet Help Trigger 'Black Swan' Stock Swoon?". Wall Street Journal. Retrieved 2023-03-16.
  11. ↑ Dahlberg, Nancy (February 19, 2014). "California hedge fund Universa moving its base to Miami". Miami Herald.
  12. 1 2 Bloomberg, Erik Schatzker (2020-04-10). "Calpers gave up a $1-billion payday by scrapping a hedge against a stocks crash". Los Angeles Times. Retrieved 2023-03-15.
  13. 1 2 Podkul, Cezary (18 April 2020). "Calpers Unwound Hedges Just Before March's Epic Stock Selloff". Wall Street Journal. Retrieved 2023-03-15.
  14. ↑ Jakab, Spencer (21 September 2018). "Triumph of the Market Pessimists". Wall Street Journal. Retrieved 2023-03-16.
  15. ↑ Schatzker, Erik (April 8, 2020). "Nassim Taleb-Advised Universa Tail Fund Returned 3,600% in March". www.bloomberg.com. Retrieved 2023-07-13.
  16. ↑ Brown, Aaron (April 6, 2023). "Universa's 3,612% Return Is Legit (But With an Asterisk)". www.bloomberg.com. Retrieved 2023-07-13.
  17. ↑ "Your Hedge Fund Made How Much? What to Make of Universa's Eye-Popping Results". WSJ. Retrieved 2023-07-13.
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