When the coronavirus pandemic sent financial markets tumbling in March last year, fund manager Mark Spitznagel had one of his most profitable periods ever. His Miami-based Universa Investments, which trades options and aims to make “explosive” returns in times of market crisis, posted hefty profits as the S&P 500 index dropped 20 per cent in the first quarter of 2020.
Such returns do not come along every day, even for Spitznagel, an outspoken trader who enjoys being the contrarian. His strategy involves suffering small losses for long periods when markets are buoyant, then making huge returns during very occasional market blow-ups. That, he points out, is almost the mirror image of what most investors are taught to do: make steady gains most of the time but accept the odd huge loss. “When someone wants to bet against a crash, I will take the other side,” he says. “I can’t have everyone agree with me. I need to be the contrarian, crazy guy that everyone sniggers at.
Dressed in a navy blue polo shirt, Spitznagel, is speaking to the FT by video link from a formal-looking, white-panelled room in his 100-year-old log house on the shores of Lake Michigan. It is one of two homes he owns in Michigan state; the other, a farm with 400 goats that produces award-winning cheese, is a short drive away.