“Black Swan” author Nassim Nicholas Taleb and quant investing pioneer Cliff Asness have engaged in a vitriolic Twitter dispute over the esoteric world of tail-risk hedging that descended into personal insults.

The spat began when Taleb sent a pair of tweets accusing the $143 billion AQR Capital Management LLC of issuing flawed reports that say tail-risk hedging doesn’t work.

The entire point is by that by cricitizing [sic] a tail risk mitigation via OTM options one would expect AQR's risk mitigation to be better. It's not and that's the story.

(I also insist that there is was never a PERSONAL mention of Cliff Aness [sic], just AQR.) https://t.co/w4jAZlKUaJ

— Nassim Nicholas Taleb (@nntaleb) May 21, 2020

After Taleb extended his argument to include a personal insult against AQR principal Antti Ilmanen, the firm’s billionaire founder Asness stepped into the fray.

First, he comparing apples to hippopotamuses. I’ve written 50 things about value’s problems. I hide nothing. Does anyone feel a yawning lack of discussion from me on our recent (not long term) travails in value related products (with no relation to tail risk crisis insurance)?

— Clifford Asness (@CliffordAsness) May 20, 2020

AQR didn’t immediately respond to an email seeking comment outside of normal business hours. A representative for Taleb said he declined to comment further, and will let the tweets speak for themselves.

Beyond the insults, the debate centers around whether tail-risk bets -- investment strategies designed to benefit from sudden dips and unforeseen ‘Black Swan’ events -- are worth the money they cost when times are good. AQR has argued that while tail-risk funds achieved massive results in March when global markets tanked, those figures bely the expense of being constantly prepared for doom.

That in turn goes to the business case of hedge funds that have been specifically designed to benefit from ‘Black Swan’ events, such as Universa Investments LP of Miami, which scored a 3,612% return in March and counts Taleb as its scientific adviser.

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