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How to Start a Hedge Fund Without Having to Run It

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Jul 13 2007
 
2:17 PM 
EDT
 How to Start a Hedge Fund Without Having to Run It

 As everybody knows very well indeed at this point, hedge fund principals can
make eye-popping sums of money. But as  Nassim Taleb  discovered
when he ran his own fund, it can be very hard
on the soul  (Related)  .

 Mr. Taleb says it was the daily grind of trading in a low-volatility market
that motivated him to quit. "I burned out," he says. "If I
go three or four years without a big bang [in the market], I start having
battle fatigue."

 Taleb wasn't making lots of money anyway, since his strategy didn't work very
well at the height of the Great Moderation. Then again, most of his investors
didn't  want  him to make lots of money. They didn't invest most of their
money with him; instead, they used him as more of an insurance policy. If all
the rest of their investments suddenly went down, there's a good chance that
their investments with Taleb would go up.

 So how come Taleb is setting up a new hedge fund, Universa
Investments  (Related)  ? Because although he's an owner of the fund, he's not the fund
manager.

 Mr. Taleb won't be directly involved in day-to-day trading at Universa. Instead,
he will be an adviser and will have a large stake in it.  Mark Spitznagel ,
a former Empirica trader, will manage the fund's daily activities.

 Nice work, if you can get it. All the upside of owning a hedge fund, with none
of the downside.

 
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