By Sam Boughedda
Mark Spitznagel, the founder of Universa Investments, a fund that aims to protect clients during black swan events, told Bloomberg in a telephone interview on Thursday that the financial system is most vulnerable to “the greatest credit bubble of human history.”
Bloomberg reported Spitznagel as saying that “if this credit bubble ever pops, it’s going to be the most catastrophic market failure that anyone has ever read about --but let’s hope that doesn’t happen.”
Universa was founded in 2007 and is advised by Nassim Nicholas Taleb. It specializes in risk mitigation, aiming to protect against the biggest market crashes.
“We’ve gotten ourselves into a tough spot," the Miami-based Universa’s chief investment officer told Bloomberg, although he insisted he is not a doom and gloomer.
Speaking on the hedge fund industry as a whole, Spitznagel said: “What purpose do hedge funds play in anyone’s portfolio? I’ve never been able to answer that question.”
Adding: “Hedge funds have created a solution for the wrong problem.”
Spitznagel explained that funds tactically trying to mitigate risk “are going to get churned and burned, that’s what the market does to people."