Wednesday, June 3, 2009

Taleb's Stranded Swan

Janet Tavakoli is still poking around the hedge funds related to Nassim Nicholas Taleb. This time she is specifically looking at the Taleb related fund,Empirica Kurtosis Ltd. And she has come up with a new list of questions for Taleb. Writes Tavakoli:

Before penning my previous commentary pdf, I contacted Nassim Nicholas Taleb to check whether there were any inaccuracies in a Wall Street Journal article about the performance of his previous black swan fund, Empirica Kurtosis Ltd. The article said the fund had a 60% return in 2000 followed by "losses in 2001 and in 2002.” In 2003 and 2004 it had low single-digit gains, a period when hedge funds posted average returns of 20% and 9% respectively. The fund’s size was around $375 million when most of the assets were returned to investors.

In my query to Taleb, I also asked for confirmation that the fund experienced a voluntary wind-up…more on that later.

Taleb did not respond. Considered with his previous coy reply regarding GQ’s mythical $20 billion, I gave up hope of clarification. I enjoy debating philosophy, but debate is no substitute for size of actual gains.

I was particularly interested in Empirica Kurtosis’s reported anemic performance in 2001, because according to Taleb, the 911 terrorist attacks of 2001 were a “black swan” event.1

How can a black swan fund do so poorly when the black swan finally appears?

1 comment:

  1. How can...

    Because Black Swans are varied in their impact? Would you expect that a "black swan" fund would automatically improve no matter what unusual event happened?