Universa Investments

A "Black Swan" hedge fund posted a 4,144% return last quarter after the novel coronavirus outbreak tanked markets.

Universa Investments' chief, Mark Spitznagel trumpeted the massive gain in a letter to clients.

Spitznagel — a protégé of Nassim Nicholas Taleb, the author of "The Black Swan: The Impact of the Highly Improbable" — warned that markets would fall further.

"If the pandemic doesn't pop this bubble then, of course, it will be something else that eventually accomplishes this."

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A "Black Swan" hedge fund that specializes in profiting from market shocks posted a 4,144% return last quarter thanks to the coronavirus sell-off.

Mark Spitznagel, the chief of Universa Investments, touted the stunning fortyfold gain from the fund's tail-risk hedging strategy in a letter to clients this week. Business Insider obtained a copy of the letter from Milton Financial Market Research Institute. The Wall Street Journal reported on the letter's contents earlier this week.

If an investor had just 3.3% of their assets in Universa and the balance in a S&P 500 tracker fund, they would have made a 0.4% return last month despite the benchmark slumping more than 12%, the letter showed.

Spitznagel is a protégé of Nassim Nicholas Taleb, the author of "The Black Swan: The Impact of the Highly Improbable." Spitznagel worked at Taleb's now closed Empirica Capital, and Taleb is Universa's scientific adviser.

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The Universa boss said in the letter that after a record bull run, markets have further to fall.

"If the pandemic doesn't pop this bubble then, of course, it will be something else that eventually accomplishes this," Spitznagel said.

A Universa representative declined to comment in an email to Business Insider.

Spitznagel made a similar observation in The Journal in March after a "great month" for Universa in February.

"For people who are worried about having missed it, this sell-off has only taken back a few months of gains," he said. "I expect a true crash to take back a decade."

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Spitznagel has scored outsize returns in the past. Universa netted more than $1 billion in a day — a 20% return at the time — when the Dow plunged by over 1,000 points in August 2015, The Journal reported.

The hedge-fund boss is a veteran at stomaching small losses for years in anticipation of the next market crash. Malcolm Gladwell quoted him in "Blowing Up," his 2002 New Yorker profile of Taleb.

"It's like you're playing the piano for ten years and you still can't play 'Chopsticks,'" Spitznagel told Gladwell, "and the only thing you have to keep you going is the belief that one day you'll wake up and play like Rachmaninoff."

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