5 ms·

Not sure about OP, but Spitznagel's fund returned 4,144% in Q1 2020. It averaged 105.2% annually from 2009 to 2019. https://news.yahoo.com/mark-spitznagel-univ

by sb057 5y ago

Not sure about OP, but Spitznagel's fund returned 4,144% in Q1 2020. It averaged 105.2% annually from 2009 to 2019. https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-mitigation-204157461.html https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-m... https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0/Nassim-Taleb-and-Universa-Versus-the-World https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0...

short_sells_poo 5y ago
This is incorrect and keeps being repeated. Universa's marketing clearly struck gold. They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Imagine you insure your car worth $20000 and pay $1000 a year in premium. Your car gets totaled and the insurance pays out $10000. You are not going to say "woah my insurance paid out 1000%", as it's a meaningless number. You are going to say: "my insurance paid out 50% of the original car value". This is the same case, but of course Mr Spitznagel doesn't mind that silly numbers are flying around his fund.
- Majromax 5y ago
  > They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way.
  - short_sells_poo 5y ago
    > Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. I feel there's a misunderstanding of what Universa is and this keeps confusing people. Universa is not an alpha fund. You don't give money to Universa with the aim that they'll generate steady income, or even any income. They are basically an insurance product. If nothing happens for 10 years, they'll just steadily lose money (this is expected) in the form of the premium. In fact, in absence of market crashes, the expected value of Universa is negative. >Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way. That's not at all how you think of a tail protection fund like Universa. The premium is just a constraint, not a risk metric. Say your portfolio makes 10% a year and you are willing to invest 1% of that in protection. That 1% premium spending is your constraint, nothing more. But your risk metric is the capital that you wish to insure, not the premium. It then follows that you should calculate the Universa return as a % of the capital you want to protect, not the premium you spend to protect it. Exmaple: you have assets worth $100 and you want to spend $1 on protection (Universa). You determine that in a 2020 style market stress event you'd be expected to suffer a 20% drawdown. Beyond protection efficiency analyses, you really don't care what your return on premium is, you care that for the 1% premium spent, your protection is expected to earn enough as a % of your assets that your total drawdowns become manageable. The premium just puts a ceiling on the overall insurance level you can afford for your portfolio, but again for this you need to think in terms of % return of your portfolio value.
    - lukenick85 5y ago
      This is totally backwards. They are not insurance. They don’t guarantee anything in a downturn. They don’t gain their profits from premiums or from ratio of customers paid out. Just like other managed funds don’t make promises but market themselves along a certain strategy. They market themselves along a different strategy. Universa is a fund. They returned 100%+ on every dollar invested. End of story. You can think of them ‘like insurance’ or ‘like a casino’ but it’s ridiculous to pretend they are.

by sb057 5y ago

short_sells_poo 5y ago

This is incorrect and keeps being repeated. Universa's marketing clearly struck gold. They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Imagine you insure your car worth $20000 and pay $1000 a year in premium. Your car gets totaled and the insurance pays out $10000. You are not going to say "woah my insurance paid out 1000%", as it's a meaningless number. You are going to say: "my insurance paid out 50% of the original car value". This is the same case, but of course Mr Spitznagel doesn't mind that silly numbers are flying around his fund.

Majromax 5y ago
> They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way.
- short_sells_poo 5y ago
  > Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. I feel there's a misunderstanding of what Universa is and this keeps confusing people. Universa is not an alpha fund. You don't give money to Universa with the aim that they'll generate steady income, or even any income. They are basically an insurance product. If nothing happens for 10 years, they'll just steadily lose money (this is expected) in the form of the premium. In fact, in absence of market crashes, the expected value of Universa is negative. >Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way. That's not at all how you think of a tail protection fund like Universa. The premium is just a constraint, not a risk metric. Say your portfolio makes 10% a year and you are willing to invest 1% of that in protection. That 1% premium spending is your constraint, nothing more. But your risk metric is the capital that you wish to insure, not the premium. It then follows that you should calculate the Universa return as a % of the capital you want to protect, not the premium you spend to protect it. Exmaple: you have assets worth $100 and you want to spend $1 on protection (Universa). You determine that in a 2020 style market stress event you'd be expected to suffer a 20% drawdown. Beyond protection efficiency analyses, you really don't care what your return on premium is, you care that for the 1% premium spent, your protection is expected to earn enough as a % of your assets that your total drawdowns become manageable. The premium just puts a ceiling on the overall insurance level you can afford for your portfolio, but again for this you need to think in terms of % return of your portfolio value.
  - lukenick85 5y ago
    This is totally backwards. They are not insurance. They don’t guarantee anything in a downturn. They don’t gain their profits from premiums or from ratio of customers paid out. Just like other managed funds don’t make promises but market themselves along a certain strategy. They market themselves along a different strategy. Universa is a fund. They returned 100%+ on every dollar invested. End of story. You can think of them ‘like insurance’ or ‘like a casino’ but it’s ridiculous to pretend they are.