Join Australia's most dynamic and respected property investment community

The Bet Between Buffett And Protégé Partners

Discussion in 'Other Asset Classes' started by Redwing, 22nd May, 2016.

  1. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    837
    Location:
    WA
    We had this on Somersoft, so here's an update

    Stakes

    A $1 million donation to the winner’s charity of choice

    The Bet Between Buffett And Protégé Partners

    Summary

    Warren Buffett argued that investors would be better off putting their money on S&P 500 Index Funds as the cost of hedge funds would undermine profits.

    Protégé Partners argued that the best hedge funds will be able to make good long and shorts decisions regardless of the market thereby beating the market after deducting cost.

    The historical trend shows that the average investors with little financial knowledge can profit from SPY n the long term. Current PE of SPY is too high to enter.

    The Lesson for Every Investor From Warren Buffett's Million-Dollar Bet

    In the recent Berkshire Hathaway (BRK.A, BRK.B) annual general meeting, Chairman Warren Buffett (a.k.a. the Oracle of Omaha) released the result of his bet with Protégé Partners, LLC. Buffett said this bet was featured on longbets.org.

    At the end of December, with just two years left to run, Buffett maintains a commanding lead:

    • Vanguard Index Fund Admiral Shares: 65.67%
    • Protege Partners' portfolio of funds of hedge funds: 21.87%
    Even Ted Seides, the then-Protege Partners' partner, who initiated the bet, admitted last year that "[t]he odds now are that we'll need to see a severe market contraction for our side of the ledger to state an epic comeback. No one wins when that occurs."

    That's a little more humility than he demonstrated at the outset of the bet, when he estimated his chances of winning at 85%; Buffett, less overconfident, thought his odds of success were 60%.

    [​IMG]
    Buffett.JPG
     
    tvadera, CatCafe, oracle and 4 others like this.
  2. austing

    austing Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    907
    Location:
    North Maleny, QLD
    Yes great post @Redwing, it has been interesting following that 10 year bet.

    Certainly highlights how high fees and convoluted / overly active strategies can often kill returns. No doubt a good advert for simple, old fashioned, long term holding of low fee broad based share index funds.
     
  3. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    737
    Location:
    Homeless
    It's great reading all the excuses given as to why they have been unable to beat the index. I'm of the opinion isn't this the kind of stuff people are paying you to predict and take advantage of as a hedge fund manager? To be fair he is a fund of funds manager so it's the people he selected that can't predict the markets.

    If you ignore the fees charged by the hedge funds you would find they have under performed the index by a bit less. What a world where people pay millions to do so badly
     
    austing likes this.
  4. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    957
    Location:
    Sydney
    Long/Short hedgies, "we can make money in any market conditions*"


    *For ourselves.
     
  5. austing

    austing Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    907
    Location:
    North Maleny, QLD
    Which also highlights another great difficulty in "choosing" Active / Hedge Fund Managers. Today's current high performing Fund superstars can be the flops of tomorrow. Consistent out performers are few and far between!
     
    Redwing likes this.