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‘Black Swan’ Hedge Fund Bets On Hyperinflation

Date: Tuesday, June 2, 2009
Author: FINalternatives.com

Universa Investments, a hedge fund firm affiliated with famed “Black Swan” economist Nassim Nicholas Taleb, is launching a new fund betting that global economic stimulus packages will lead to hyperinflation.

The Black Swan Protection Protocol-Inflation fund is the brainchild of Mark Spitznagel, a longtime Taleb collaborator who owns and manages Universa. Taleb himself has no ownership stake in the Santa Monica, Calif.-based firm, but is a major investor and adviser.

According to The Wall Street Journal, the new Black Swan fund offers investors big returns if inflation and interest rates soar as they did in the 1970s. The fund will invest in commodity options, as well as commodity-linked stock options, including oil drillers and gold miners. Spitznagel’s fund will also short Treasury bonds.

“We think these things are going to see massive volatility,” Taleb told the Journal.

Investors have flocked to Universa, which has seen its assets soar twenty-fold to $6 billion over the past 18 months. The firm has closed several funds to new investors, after some of them doubled in value last year betting against the market.

But investing with Universa isn’t easy, or cheap: The firm has a $25 million minimum investment requirement, the Journal reports, and rarely accepts investments of less than $100 million.