Perspectives

If Sy Harding took Warren Buffet’s Bet

I do not post often to my seasonal blog, but this one I wanted to point my readers too. I agree with much of what Warren Buffet says about actively managed funds in terms of cost and poor performance.

The Seasonal Indicator

The Bet

In 2008, Warren Buffett issued a challenge to the hedge fund industry, which in his view charged exorbitant fees that the funds’ performances couldn’t justify. Mr. Buffett contended that, including expenses, a passive strategy invested the low-fee Vanguard S&P 500 index fund would outperform an actively managed portfolio of hedge funds over the 10 years ending Dec. 31, 2017. Protégé Partners LLC accepted, and the two parties placed a $1,000,000 bet.

Who is winning

By the end of 2015, Warren Buffet’s passive investment in Vanguard’s SP500 fund is up 65.7% compared to Protégé’s funds up only 21.9% and this is after Protégé got off to a better start in the 2008 bear market year.  With two years left Protégé will have a difficult time making up the 44% difference.  The passive philosophy is easily beating the active philosophy, but what is missing from the discussion is the third…

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Categories: Perspectives