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Universa Investments L.P.
Company typePrivate
IndustryInvestment Management
FoundedJanuary 2007; 17 years ago (2007-01)
FounderMark Spitznagel
HeadquartersMiami, Florida, U.S.
Key people
Mark Spitznagel (President)
Nassim Nicholas Taleb (Scientific Advisor)
ProductsHedge funds
Alternative investments
AUMUS$19.1 billion (June 30, 2022)[1]
Number of employees
18 (2022)
Websiteuniversa.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]

Background

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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]

References

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