Eye catching headline, but the set of hedgefunds is diverse with a large range of performance. I imagine the upper tails do pretty well
Can you guarantee me access to upper tail funds? I'm interested. I'd love to get my money into Medallion.
Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
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Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#92Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
The problem for the every-person is finding the one that succeeds rather than fails. Given that in the aggregate these investments so severely underperformed, we can conclude that on an weighted average basis, you were more likely to lose money than gain money.
No one disputes that some funds will over perform. The question is, which one? If you can predict that reliably, you will be rich.
Most people can't.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#93Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
So do you mind telling us which funds have a 100% certainty of >S&P500 performance over the next few decades please?
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#94Hedge fund guy here. - You have to consider risk. Perhaps use volatility as a proxy. Were the funds more or less volatile than the S&P? There are funds that are more and funds that are less. The bet ought to be adjusted for that, ie some form of risk adjusted return. - It's a rigged bet. A fund of 5 funds of funds is going to be the market, minus fees. Yes there are funds that aren't just long the market but quite a…
Value investors like Graham/Buffett/Klarman generally define risk in terms of the price that you pay relative to intrinsic value. They would not agree that targeting low-volatility inherently lowers risk, so I can't imagine both sides agreeing to award bonus points for that.
Second point not related to parent post: it seems that picking the experts is every bit as hard as directly picking great investments. There are so many investors who were portrayed in the financial press as "The next Buffett" but went on to have poor returns. I can think of four or five of these guys off the top of my head. And then beyond that there must be literally tens of thousands of full-time mutual fund salesmen who fail to pick mutual funds for their clients that beat the market. So in addition to the underperformance of the funds, there's very often another layer of scraping on the transaction.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#95Earlier quoted context omitted.
It's not just some people. It is actually the law in most states (albeit a seldom-enforced one). Don't cruise in the left lane.
Does that mean the left lane should be unoccupied if everyone in the other lanes are driving at the speed limit?
No. It should be unoccupied if nobody is passing. If it is empty on a particular stretch, somebody will decide to pass.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#96Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
Quibble... Buffet doesnt buy bad companies. He buys solid companies that have excellent management and for some reason are inexpensive at the time of purchase.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#97So how is Mortimer paying him the bet? Is it a suitcase full of $1 bills?
The money is going to Girls Incorporated of Omaha, the charity chosen by Buffett.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#98Although there is still tons of money going to actively managed funds it seems to be more and more common knowledge that index fund investing is ultimately the smartest thing to do for personal finance.
Does anyone know what the risk factors are (if any) to this type of passive investing if EVERYONE begins to do the same thing?
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#99Hedge fund guy here. - You have to consider risk. Perhaps use volatility as a proxy. Were the funds more or less volatile than the S&P? There are funds that are more and funds that are less. The bet ought to be adjusted for that, ie some form of risk adjusted return. - It's a rigged bet. A fund of 5 funds of funds is going to be the market, minus fees. Yes there are funds that aren't just long the market but quite a…
I can only but point you back to read the article. You may have misunderstood some facts: - He made a bet with the manager of Hedge funds that picked 5 funds of funds. None of the picked fund of funds performed better than S&P. So it is 5 against 1. We can say that this manager picked the wrong one, but none other took the risk of the bet... - Look at the first chart just at the top of the article. Hedge funds perfor…
No, you are the one who has misunderstood something. I'm saying it's rigged against the fund chooser. Read it again.
> You mention that plenty of individual funds did beat the S&P. This is straight an apocryphal anecdotal fallacy.
No it isn't. If the guy was smart about what was being bet on he'd have picked RenTech and he'd have won.
> I understand you are trying to defend your business.
Nope. Just providing some colour so they don't think it's as simple as it sounds.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#100Although there is still tons of money going to actively managed funds it seems to be more and more common knowledge that index fund investing is ultimately the smartest thing to do for personal finance. Does anyone know what the risk factors are (if any) to this type of passive investing if EVERYONE begins to do the same thing?
I had an interesting conversation with a very smart investor last year, and basically his idea was that while active managers will sell certain specific stocks (less volatile stocks) to fulfill redemptions in the event of a decline and/or crash, ETFs will generally just hit an (automated) sell on everything across the board. So proportionally they will sell off significantly more volatile small and midcaps vs large caps.
Every since I have had that conversation, I no longer invest in passive index funds or ETFs.