Universa – the hedge fund that profits from ‘black swan’ events

A ‘black swan’ event is something financial markets fail to factor in because it is so improbable. It can make markets fall sharply and quickly, as investors all race for the door. Mark Spitznagel founded Universa Investments to focus entirely on these unlikely occurrences. Universa buys ‘far out of the money’ options on US share markets, protecting against extremely unlikely falls. Most of the time, these options expire worthless. But when a black swan event hits, the options can suddenly be ‘in the money’ – and valuable to their owners. This proved to be the case when Covid-19 sent share markets plummetting in March 2020. NZ Funds has worked with Universa since 2013. Mark speaks to our Chief Investment Officer James Grigor about Universa’s contrarian investment approach.