stop it

Six years ago, a fund of hedge funds guy bet Warren Buffett a million dollars that his well chosen portfolio of five funds would beat the returns of Buffett’s chosen vehicle, Vanguard S&P 500 fund.

Needless to say, it’s not much of a contest.

Said fund of funds guy is now offering up the following reasons for not even being close:

* Well, our fees are much, much higher (Ummm, that was Buffett’s point)
* We don’t actually think this is a fair benchmark after all (so why did you make the bet?)
*  The Fed intervened (if you can’t navigate monetary policy, then what exactly are you charging for?)
*  Give us another ten years, you’ll see! (Make it a hundred years, who’s counting?)

I wish I were joking.

I’m planning to print out the hedge fund maven’s eight-page defenestration of his original thesis and why it didn’t work so I can hand it out to prospective clients who come to us looking for fancier, more sophisticated portfolios.

To be clear, I don’t have a problem with alternative strategies or funds that aspire to deliver non-correlated returns to the S&P 500. My point here is that if the S&P 500 is a bad benchmark, then why make the bet?

Further – wouldn’t it just be easier to admit that most hedge funds work best as a status symbol for wealthy people who enjoy following them as recreation and love to discuss their membership in the club? Isn’t that better than trying to move the goalposts after the fact?


Read all about it here:

Protégé Partners: These factors ‘wreaked havoc’ in our bet against Buffett (Yahoo Finance)

Cry me a river that leads to Omaha (Michael Santoli)

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

What's been said:

Discussions found on the web