Universa Investments, a tail-risk hedge fund advised by Nassim Taleb, is facing criticism from rival hedge funds for its unconventional reporting style and claims of extraordinary returns. Critics argue that Universa cherry-picks data to boost its results, while the firm insists its unconventional business warrants an unconventional reporting method. The debate highlights the ongoing disagreement over whether tail-risk funds deliver on their promises.
Despite the backlash, Universa's clients continue to see value in the investment proposition. The firm asserts that it lowers systematic risk in portfolios, leading to higher rates of return. However, detractors argue that the fund's unconventional calculations make it difficult to accurately measure its performance and that its insurance costs are too high for the long term.
Tail-risk funds offer insurance against extreme market volatility, usually through the purchase of options. Universa's unique approach calculates returns based on "required invested capital" rather than assets under management, which critics say is not a standard industry metric. The ongoing dispute underscores the challenges in measuring and comparing tail-risk fund performance.
The controversy surrounding Universa raises questions about the efficacy of tail-risk funds and the need for clearer industry standards in performance reporting. As market fears continue to rise, this debate highlights the importance of understanding the true value of tail-risk funds and whether they live up to their billing.
