In the early hours of Saturday morning after drinking far too many Echter Nordhaeuser (rye vodka) I got an email from Jim S.

My eulogising of Mark Spitznagel's long and lonely road through barren spells with his long vol fund was all wrong.

In fact, his fund, Universa was making money throughout the one of the biggest bull markets ever.

The headline of the story from late last year is,

A Bearish Hedge Fund Bets Against the Bulls and Still Profits

and the elevator pitch,

Large pessimistic bets usually lose a lot of money when stocks are rising, as they have ever since 2009. But Universa is saying that its investment strategy has been able to produce consistent gains since then, including a 30 percent return last year, according to firm materials that were reviewed by The New York Times.

Nothing is impossible, but when you read something like this your spidey sense starts tingling.

Style creep, is one of the biggest issues when large institutions invest in hedge funds.

You want to get what you pay for, no point everybody jumping into the trade of the month when it reduces overall diversification.

So was Universa caving under bull market pressure and becoming a beta monkey?

The recent fund materials that contain the positive numbers may be marketing materials aimed at selling a type of financial catastrophe insurance to investors who are getting jittery about the stock markets’ gravity-defying rise. The materials show how bearish bets could be paired with broad holdings of stocks — and still produce gains.

The emphasis is mine. Maybe marketing materials?

Most people are swimming in beta. Universa's customers have billions of dollars worth of it, they don't really need any more. No one complains about profits, but you can rest assured that if the fund started generating those kinds of profits questions would be asked.

Have no fear though,

Universa is not alone in saying that it can make money in good times and bad. Other firms also offer bearish bets that clients can use to hedge their stock portfolios. Such bets often cost so much that they have to be used sparingly.

Yet Universa seems to be saying that its catastrophe insurance is comparatively cheap.

Universa's discerning institutional investors can rest easily again.

The headline is completely misleading. I expect more from the NYT.

On the other hand I see this type of marketing story from Universa as a smart evolution in selling their funds, good for them.


Big thanks again to Jim S.!

Here's Mark doing his speel.