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Funnily enough the "trick" with this kind of fund is to be able to survive good times. A firm I ran actually had a fund that did what's described here. In fact

Funnily enough the "trick" with this kind of fund is to be able to survive good times. A firm I ran actually had a fund that did what's described here. In fact Taleb himself came to visit us. Your main problem is you're selling a lottery-like return. The professional investors that you meet would have to explain to their committees every month why they're losing money. If a collapse happens every 10 years, there's a while between. So then your problem is "How do I credibly demonstrate that this strategy is worthwhile, and that I'm the best guy to do it?". Because this isn't going to be the only fund offering this kind of protection.

thoughtstheseus 7y ago
This is so true. What’re your 1yr, 3yr, 5yr returns and vol? In these strategies a consistent track record makes no sense because you’re planning for events with different magnitude of impact and frequency than the norm.
blawson 7y ago
The article says they were ahead of the S&P 500 up through December 2019 so they weren't simply waiting around for the big one.
raincom 7y ago
That's why it is important to size one's bets in order to survive. Undersizing one's bets can reduce the windfall; oversizing one's bets can wipe out, leaving nothing to bet further. Practical people(unlike the theorists of Efficient Market) have studied this for a long time. That's what Kelly Criterion about portfolio management. Ed Thorp, first, utilized this.
sjg007 7y ago
This hedge fund is selling financial insurance basically. You spend money with them and get a huge payout if things collapse. This is an option to buy low vs buy low.
dntbnmpls 7y ago
> Funnily enough the "trick" with this kind of fund is to be able to survive good times That's the trick to every fund. Whether bull or bear or neutral. It's weathering the storm. If you are a small growth fund during a recession, you're ability to hold onto your investors/capital determines whether your fund survives or not. It's the same going the other direction. Those able to weather the storm win big later on and look like geniuses. Those who cannot, lose and fold and look like fools.

thoughtstheseus 7y ago

This is so true. What’re your 1yr, 3yr, 5yr returns and vol? In these strategies a consistent track record makes no sense because you’re planning for events with different magnitude of impact and frequency than the norm.

blawson 7y ago

The article says they were ahead of the S&P 500 up through December 2019 so they weren't simply waiting around for the big one.

raincom 7y ago

That's why it is important to size one's bets in order to survive. Undersizing one's bets can reduce the windfall; oversizing one's bets can wipe out, leaving nothing to bet further. Practical people(unlike the theorists of Efficient Market) have studied this for a long time. That's what Kelly Criterion about portfolio management. Ed Thorp, first, utilized this.

sjg007 7y ago

This hedge fund is selling financial insurance basically. You spend money with them and get a huge payout if things collapse. This is an option to buy low vs buy low.

dntbnmpls 7y ago

> Funnily enough the "trick" with this kind of fund is to be able to survive good times That's the trick to every fund. Whether bull or bear or neutral. It's weathering the storm. If you are a small growth fund during a recession, you're ability to hold onto your investors/capital determines whether your fund survives or not. It's the same going the other direction. Those able to weather the storm win big later on and look like geniuses. Those who cannot, lose and fold and look like fools.