A Big Bet on Inflation. Can last year’s star manager repeat his success?
“Mark Spitznagel made a fortune predicting the ‘black swan’ that hit markets last year. Now the relatively unknown hedge-fund manager is emerging from the shadow of his collaborator, Nassim Nicholas Taleb, with a big bet inflation will soar. The 38-year-old Mr. Spitznagel managed the Black Swan funds to triple-digit returns last year with a bet on volatility. The returns have brought a flood of cash, sending assets for his firm, Universa Investments LP, rising to $6 billion from $300 million … ‘Black swan’ alludes to the once-widespread belief that all swans are white — proved false when European explorers found black swans in Australia. A black-swan event is something extreme and highly unexpected. Mr. Spitznagel’s winning streak now will be tested.
Universa is poised to make a huge wager that will reap big rewards if inflation surges. Inflation is on investors’ radar thanks to extensive economic stimulus efforts … The new fund, expected to start trading in July, will place bets on options tied to assets expected to benefit from a big leap in prices, including commodities such as corn and crude oil, and options on shares of oil drillers and gold miners. It also will short Treasury bonds, likely to weaken in an inflationary economy … The inflation bet marks a change for Universa. Typically, Messrs. Spitznagel and Taleb don’t have an opinion about the near-term direction of the markets or economy. Rather, they argue, investors tend to underestimate the risks of major market swings. The latest wager is more of a directional bet that regulators’ efforts to prop up the financial sector and the broader economy will spark inflation.”
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