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?
I’m a New York City-based financial advisor at Ritholtz Wealth Management LLC. I help people invest and manage portfolios for them. For disclosure information please see here.
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RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
LOL brutal but Josh nails it! stop it by @ReformedBroker http://t.co/7x5DWLpu7n
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
RT @JohnMelloy: Love that you’re going to hand that out to clients RT @ReformedBroker: stop it http://t.co/TMYwa3XUQM
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
stop it @ReformedBroker http://t.co/vAm1OGhpKs HFs should underperform a hyperbull S&P. LBO/PE should crush it, isn’t http://t.co/TwMkcBCGmy
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
Tough to beat Mr. Market for any extended period. Tough to impossible. @ReformedBroker http://t.co/bDVZHbtuOT
stop it by @ReformedBroker http://t.co/KlkHRL5uLA
Most hedge funds are just a status symbol.
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8
stop it by @ReformedBroker http://t.co/EGm2d6hO0m Perfect.
RT @ReformedBroker: stop it http://t.co/eyHWnD7pF8