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The rocky road to big gains that might not happen – FT.com

Famed investment sage Warren Buffett, like many before him, decided to sell options. Veteran trader and renowned intellectual Nassim Taleb, on the other hand, decided to buy options. While Mr Buffett would have gone for the first choice in the game proposed at the beginning, Mr Taleb would have gone for the second choice.

So, are you a Warren or a Nassim?

In 1999, Mr Taleb founded Empirica hedge fund with his student Mark Spitznagel, with the mandate to bet on the improbable long odds market happenstance. Empirica made 57 per cent in 2000, then lost 8 per cent in 2001 and 13 per cent in 2002. It closed in 2005 and in 2007, Mr Spitznagel founded Universa hedge fund, with Mr Taleb as adviser. Universa returned 115 per cent in 2008 and 23 per cent in 2011 through August. It lost 4 per cent in 2009 and in 2010. Today, it is considered a leader in tail hedging strategies and its success together with the vindication of Mr Taleb’s philosophy by real world developments has spawned numerous imitators.

via The rocky road to big gains that might not happen – FT.com.
HatTip to Dave Lull.

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