At the end of 2017 comes to an end bet which a decade ago made one of the world’s richest people Warren Buffett investor of Protégé Partners, which won the Buffett, says Meduza.
The essence of the dispute is this: Buffett argued that the most profitable investment in America is to simply invest in stock index broad market S&P 500, and his opponents – what will they come up with such hedge funds (stocks are selected manually), which will bypass the S&P 500 at a distance of ten years.
“In the Berkshire annual report 2005 I argued that active investment management professionals for a certain period of time will be less profitable than the fans that did nothing. I explained what great benefits a variety of “assistants to” leave their clients – again, together – in a worse position than the fans who simply invested in low-cost index Fund, which do not control,” wrote Buffett in a letter to shareholders of Berkshire Hathaway Inc. in 2016
Ten years ago, Buffett offered one of the investors with hedge funds, betting on the subject. He responded to the Manager Protégé Partners Ted Seides. In the end, they both invested for 330 thousand dollars – Buffett’s index Fund Vanguard 500 based on the S&P 500, Protégé Partners – in five funds, invested a total of a hundred hedge funds managed by professionals. The loser has to give a million dollars to charity.
In 2016, Warren Buffett wrote that in the last nine years, he clearly wins – since that time, the yield of the index Fund exceeded 85 percent, while the average yield of the five “funds of funds” amounted to about 22 percent.
“I am sure that in most cases, managers at both levels [of hedge funds and parent funds] – honest and intelligent people. But for investors the results were sad – really sad,” wrote Buffett. He noted that hedge Fund managers can make a significant profit even in case of unsuccessful investment. He estimated that in nine years of dispute the managers got about 60% of all profit received by these five funds.
Ted Sides in may 2017 admitted defeat. However, he noted that the winning Buffett is associated not only with large fees managers. He pointed, in particular, that the selected Buffett the S&P 500 index is focused on large American companies that have shown growth in recent years; hedge funds is more focused on international companies and indices which included similar companies showed growth similar to the growth of hedge funds. He also noticed that in the declining market, the profit of investors hedge funds are usually more than investors in index funds.
Another Manager Protégé Partners Jeff Tarrant added that in a sense, considers himself the winner because bet could for ten years to dine with Buffett.
The official outcome of the dispute yet – Protégé Partners still have a week. Likely to win Buffett’s even more impressive than at the end of 9 years: the S&P 500 rose for 2017, almost 20% and updated the historical maximum. The presidency of Donald trump strongly revived the stock market. In just 10 years, the S&P 500 gained 80%.
On the background of the conclusion of the dispute with Sitecom Buffett made another bold prediction. According to him, the Dow Jones index over the next one hundred years to reach one million points, that is, to grow 40 times. A hundred years ago the index was approximately 300 times smaller (81 points).
Earlier it was reported that in the summer of 2017 Warren Buffett sold right to dine with them for $2.67 million