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BW Businessworld

Betting On Disasters

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Here's something for Indian fund managers to think about, given the prospects of global shocks and our falling stockmarkets: a Black Swan ETF. Horizons, one of Canada's biggest ETF issuers, recently launched a series of exchange-traded funds (ETFs) that are designed to protect investors from sudden plunges in equity markets, stemming from possible sovereign debt defaults by stressed and highly indebted European governments, for example (Spain and Italy come to mind). Nassim Taleb, who coined the term and wrote a book on them, is a distinguished scientific advisor to Horizons Universal Investments, founded by Mark Spitznagel, who made his fortune by betting against the markets in 2008: his fund returned more than 2,100 per cent. The ETFs consist of two pieces: exposure to broad stock indices like the S&P 500 and a pool of put and call options that use a Black Swan Protection Protocol, managed by Spitznagel. If you ever wanted to trade on a disaster, this is your chance.

(This story was published in Businessworld Issue Dated 11-06-2012)