Black Swan

A hedge fund advised by Nassim Nicholas Taleb, the man who popularized the "black swan theory," made a killing on Monday. 

The Wall Street Journal's Juliet Chung reports that Mark Spitznagel's Miami-based Universa Investments was up 20% on Monday.

The fund netted about $1 billion in profits over the course of the week, some realized and others on paper, according to the report.

We reached out to Universa for comment.

Taleb, the author of "The Black Swan" and "Antifragile," serves as a scientific advisor to Universa. A "black swan" is an unexpected and rare event that has significant consequences. 

That is what we experienced on Monday when the Volatility Index (VIX) hit its highest level in four years as markets got clobbered and the Dow collapsed 1,000 points in early trading. 

It is the sort of thing that hedge funds like Universa are made for. 

Business Insider reported earlier in the week that volatility hedge funds run by New York-based Capstone Investment Advisors and London-based 36 South had made seen huge returns this week.

Taleb asserts:[8]

What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

I stop and summarize the triplet: rarity, extreme 'impact', and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.

http://www.zerohedge.com/news/2015-08-28/nassim-talebs-fund-made-1-billion-monday-how-other-hedge-funds-did

Nassim Taleb's Fund Made $1 Billion On Monday; This Is How The Other "Hedge" Funds Did