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Mark Spitznagel (/ˈspɪtsnɡəl/; born March 5, 1971) is an American investor and hedge fund manager. He is the founder, owner, and Chief Investment Officer of Universa Investments, a hedge fund management firm based in Miami, Florida.[2]

Mark Spitznagel
Hedge Fund Manager Mark Spitznagel.jpg
Born
Mark William Spitz-Nagel

(1971-03-05) March 5, 1971 (age 47)
ResidenceMichigan and Miami
NationalityAmerican
Alma materNew York University, Kalamazoo College
OccupationInvestor, hedge fund manager
Known forFounding and managing Universa Investments
Spouse(s)Amy Spitznagel

He is known as a pioneer in so-called “tail-hedging[3] or “black swan” investing, an investment strategy intended to provide “insurance-like protection” against stock market crashes.

Contents

Early life and educationEdit

Spitznagel has a graduate degree in Mathematics from the Courant Institute of Mathematical Sciences at New York University and an undergraduate degree from Kalamazoo College.[1]

When he was 16 years old, Spitznagel was apprenticed by 50-year veteran corn and soybean trader Everett Klipp.[4][5] Spitznagel became an independent pit-trader at the Chicago Board of Trade and later a proprietary trader at Morgan Stanley in New York.[6]

In 1999, Spitznagel and author and financial mathematician Nassim Nicholas Taleb (who was Spitznagel’s professor at NYU) established the Empirica Capital “tail-hedging” fund.[7][8]

Investment careerEdit

In 2007, Spitznagel founded the hedge fund Universa Investments, where he is the Chief Investment Officer, and which offers a type of insurance against extreme market risk.[9]

In 2018, The Wall Street Journal reported that “a strategy consisting of just a 3.3% position in Universa with the rest invested passively in the S&P 500 had a compound annual return of 12.3% in the 10 years through February (2018), far better than the S&P 500 itself” (and portfolios with “more traditional hedges”).[10]

Moreover, “Universa was among a handful of funds that made huge gains in 2008.”[10] In 2010, it was alleged that a large trade by Spitznagel in the minutes leading up to the 2010 Flash Crash (when the Dow lost over 9% of its value during the day) was among its primary triggers.[11]

Investment approachEdit

Spitznagel’s self-described investment strategy is focused on risk mitigation in portfolio construction, and is intended to allow his clients to take more systematic risk.[12] In general terms, he does this by owning far out-of-the-money put options on stocks. He has called “investing ÜbermenschFriedrich Nietzsche’s slogan “amor fati”—or the love of one’s fate—“the secret to successful investing.”[13]

Spitznagel is dismissive of Modern Portfolio Theory, specifically its emphasis on correlations and mean-variance (or Sharpe ratios).[12][14] He has described what he does as lowering what he calls the “volatility tax” paid by investors—"the hidden tax on an investment portfolio caused by the negative compounding of large investment losses.”[15] He detailed in an investor letter how “mathematically, it is the rare big loss, not the frequent small losses, that matters most to long-run compounding,” and called the Swiss mathematician and physicist Daniel Bernoulli “Universa’s Patron Saint.”[16]

Despite his stated skepticism of market forecasts,[12] according to a New York Times article Spitznagel “gained credibility in the investment world by predicting two market routs in the past decade, first in 2000 and then in 2008,”[17] as well as predicting the “2000s commodities boom.”[4] In a 2015 op-ed (The Myth of Black Swan Market Events) he connected every similar high point in the Tobin's Q-ratio since 1900 with past monetary interventionism and subsequent stock market losses, which he called “perfectly predictable, by economic logic alone.”[18]

Spitznagel wrote a book in 2013 titled The Dao of Capital: Austrian Investing in a Distorted World about the Austrian School of economics and its ostensible application to investing.[19] Paul Tudor Jones said of Spitznagel’s book that it “shows how a seemingly difficult immediate loss becomes an advantageous intermediate step for greater future gain, and thus why we must become ‘patient now and strategically impatient later’.”[20]

Political and economic viewsEdit

As a libertarian and Austrian economics advocate, Spitznagel has been very critical of central bank monetary interventionism. For instance, he has written pieces on Ludwig von Mises (The Man Who Predicted the Depression)[21] and about the Fed's culpability for “increasing wealth disparity,”[22] which emphasized the market and capital distortions resulting from money creation. Nobel laureate and New Keynesian economist Paul Krugman has critically addressed Spitznagel's positions.[23]

Along with entrepreneur Peter Thiel, Spitznagel was the principal supporter of the 2012 Republican Presidential campaign of U.S. Congressman Ron Paul, a friend and fellow libertarian who “shares [Spitznagel's] contempt for the Federal Reserve”[24] and his desire for a non-interventionist foreign policy.[25][dead link] Spitznagel was also Senior Economic Advisor to the 2016 Republican Presidential campaign of Ron’s son, U.S. Senator Rand Paul.[26]

Personal lifeEdit

Spitznagel was among the first in a growing list of prominent hedge fund managers who moved their operations to Florida.[27] In 2014, he moved his hedge fund offices from Los Angeles to Miami, citing Florida’s “more hospitable business and tax environment” than California’s.[28]

According to The Wall Street Journal, “Spitznagel splits his time between Miami, where his 20th-floor office overlooks the Atlantic, and Michigan, where his family lives and where he owns a farm.”[6]

He and his wife built, own, and operate Idyll Farms, a farm in Michigan that pastures dairy goats and produces artisanal chèvre. Food critic Larissa Zimberoff wrote on Bloomberg, “a hedge fund pioneer is making some of the best goat cheese in America.”[29]

Spitznagel also reportedly “flies planes and practices ashtanga yoga.”[6]

See alsoEdit

ReferencesEdit

  1. ^ a b The Secret to Mark Spitznagel’s Success? Not Following the Crowd Archived April 14, 2010, at the Wayback Machine, CIMS Newsletter, Fall/Winter, 2009
  2. ^ Universa Investments L.P., firm website
  3. ^ Tail-Risk Hedge Pioneer Spitznagel on Safe Havens, Keynote address, Bloomberg Invest New York Summit, June 7, 2017
  4. ^ a b Patterson, Scott. Spitznagel Bets Reputation on Inflation, The Wall Street Journal, June 17, 2009
  5. ^ Veteran Trader of the Chicago Board of Trade, Chicago Tribune, January 31, 2011
  6. ^ a b c Meet Mark Spitznagel, the Investor Behind Universa’s Big Gain, The Wall Street Journal, August 31, 2015
  7. ^ Malcolm Gladwell, Blowing Up Archived February 24, 2011, at the Wayback Machine, The New Yorker, April 29, 2002
  8. ^ Malcolm Gladwell, What the Dog Saw: And Other Adventures. Little, Brown and Company. 2009
  9. ^ Mark Spitznagel beats drum for tail risks as markets stall, Financial Times, May 16, 2016
  10. ^ a b Triumph of the Market Pessimists, The Wall Street Journal, September 21, 2018
  11. ^ Did a Big Bet Help Trigger 'Black Swan' Stock Swoon?, The Wall Street Journal, May 11, 2010
  12. ^ a b c Future Financial Crises Will Be Deeper, Universa's Spitznagel Warns, Bloomberg TV, September 14, 2018
  13. ^ Amor Fati, (Universa website), January 2019
  14. ^ Universa's Spitznagel on Fed Policy, Hedge Funds and Insuring Market Risk, Bloomberg TV, February 5, 2019
  15. ^ The Volatility Tax, (Universa website), February 2018
  16. ^ Spitznagel, Universa Decennial Letter: What’s Past is Prologue, March, 2018
  17. ^ A Hedge Fund Manager Who Doesn’t Mind a Losing Bet, The New York Times, June 29, 2011
  18. ^ Spitznagel, The Myth of Black Swan Market Events, The New York Times, February 13, 2015
  19. ^ Black Swans Are A Myth, Government Intervention Is The Only Black Swan, Forbes, August 21, 2013
  20. ^ The Dao of Capital: Austrian Investing in a Distorted World. New York: John Wiley & Sons. September, 2013
  21. ^ Spitznagel, The Man Who Predicted the Depression, The Wall Street Journal, November 6, 2009
  22. ^ Spitznagel, How the Fed Favors The 1%, The Wall Street Journal, April 19, 2012
  23. ^ Krugman, Plutocrats and Printing Presses, The New York Times, April 20, 2012
  24. ^ Hedge-fund manager Mark Spitznagel to host Ron Paul fundraiser, Digital Journal, March 6, 2012
  25. ^ Americans Must Choose Non-intervention For Peace and Prosperity, Mises Institute[dead link]
  26. ^ Hedge fund giant joins Rand Paul campaign as economic adviser, Washington Examiner, June 19, 2015
  27. ^ More investors leaving U.S. northeast for Florida, Reuters, September 13, 2016
  28. ^ Spitznagel’s Universa Moves To Miami, FINalternatives, Feb 19, 2014
  29. ^ A Hedge Fund Pioneer Is Making Some of the Best Goat Cheese in America, Bloomberg Pursuits, November 7, 2017