The Greatest Investor In History Is Not Warren Buffett, Nor Jim Simons
A goat farmer has been able to exceed 70% per year in his Hedge Fund.
Mark Spitznagel is a hedge fund manager, founder, president and chief investment officer of Universa Investments L.P., a Hedge Fund that has dedicated itself to risk management or, as they prefer, risk-taking.
This fund was founded in 2007 with the mission of covering the investor from any stock market crash that may occur. Its philosophy is based on the ‘Roundabout Path’ which consists of getting rid of instant gratification in the short term, as most investors seek, for much greater gratification in the long term. Spitznagel compares his investment style to many occurrences in nature, for example, conifers compete with angiosperms, a very fast-growing plant. Unlike angiosperms, conifers grow slowly, but they establish strong roots. These roots allow them to grow much taller in the future and live for many more years.
This is precisely what Universa Investments has done over the last 14 years, where it has mainly benefited from 2008 and the recent Covid crisis in 2020. The latter has been very resounding in the investment world, as they reported gains of 4,100% during the first quarter of 2020. This has pushed their CAGR to over 70%, making them one of the highest performing managers in history.
Spitznagel sees patience as a virtue in order to generate higher returns in the future. This has allowed him to adapt his lifestyle to his investment style, as he is currently living on a farm and herding goats.
In addition, he considers himself a faithful follower of the Austrian school, which promotes that systems are self-regulating until they find a balance. This balance is not being achieved because central banks are significantly adulterating the system. This means that the stock market crash we will face will be even bigger than the one experienced in 2008, as the FED is devaluing the dollar against other currencies.
In times of stock market crashes, ‘diworsified’ portfolios tend to correlate and behave in the same way. On the other hand, these situations lead to illiquidity problems in the markets just when they are most needed.
This philosophy is very similar to the one promoted by Nassim Taleb, author of ‘The Black Swan’, this has made Taleb a hedge fund advisor. Taleb, made most of his wealth during the crash of ’87 when he took advantage of one of the biggest drops in the history of the Dow Jones to make most of his wealth, which made him able to quit his job as a financial analyst and dedicate himself to reading and reflecting.
Investing in this Hedge Fund is very complicated since it requires a minimum capital of $50M, in addition, the investor must be very clear about the investment style since it is difficult to keep waiting for long periods of time when the rest of the investors are making very high returns. In order to align the fund and the investor, Universa only issues letters to investors every 10 years and the minimum investment period is also 10 years. However, here is a simplified example of what Spitznagel’s investment style entails.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.