Aaron Brown, Columnist

Those Astronomical Returns Aren't What They Seem

Many of the big gains reported by so-called tail risk funds and others are being presented in a misleading way.

May 29, 2020 at 10:00 AM UTC

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

Some black swans are not what they appear to be.
Photographer: Roland Weihrauch/DPA/AFP via Getty Images

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Every so often there are news reports of someone generating seemingly impossible returns in the financial markets. Several media outlets reported recently that hedge fund manager Bill Ackman made a 9,530% return in March, turning $27 million into $2.6 billion. So-called tail-risk hedge fund Universa Investments LP posted a 4,144% return that same month.

Most people probably can’t easily process these numbers or relate them to more normal performance like earning 2% on a bond or 9% in an equity mutual fund. It feels like lottery-ticket territory, which breeds doubts that the results are true. This is unfortunate, because there is useful information in the reports, but it’s presented in a highly misleading way.