Readings: Universa Fund, Alternative Assets, Indian REITs
Nassim Taleb . . . is helping to launch a hedge fund, Universa Investments LP. The Santa Monica, Calif., firm started in January with a fund of about $300 million in assets under management.
Empirica, started in 1999, was designed to offer large investors — typically other hedge funds — protection from huge market declines. In 2000, it had a return of about 60% after fees as the dot-com stock bubble burst.
The fund’s returns soon dwindled, as a widely followed measure of market volatility — the Chicago Board Options Exchange’s implied volatility index, or VIX — plunged to historic lows. Empirica posted losses in 2001 and in 2002, and in 2003 and 2004 it had low single-digit gains, two years when hedge funds posted average returns of 20% and 9%, respectively. It had about $375 million under management when it returned most of its assets to investors.
Cheatle manages a photography investment fund, set up by the hedge fund WMG in London, which had raised the money to buy the photographs, including Brassai’s of Pablo Picasso in his studio and Eve Arnold’s Malcolm X, from a handful of investors. WMG hopes the fund will make returns of as much as 50% over three years by buying and selling the art.
One problem for investors, Hall said, is that they are largely at the mercy of the specialized fund managers. “Would the average investor know that autographs by Robert de Niro are worth more than Tom Cruise’s because they are rarer? Probably not,” he said.
deNiro vs. Cruise? No competition!
Rajiv Singh, vice chairman of DLF Ltd., India’s biggest property developer by market value, told Bloomberg News last week that the Indian market can “comfortably absorb” $25 billion to $30 billion in REIT securities every year.
The “fair value” of property in India isn’t just unknown. In the present state of the physical market, it’s unknowable.
Crisil Ltd., an Indian credit-rating company, forecasts investment trusts to capture $70 billion of the country’s property assets, or 5% of the total, by 2010.
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