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Ryan Nauman
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Stephen Berei
VP, Client Services & Implementation
Jeremy Poulin
Senior Client Consultant

Are you willing to take on Warren Buffett?

Mar 10, 2015 Ryan Nauman

Maybe you would be confident to play a game of horse against him or a round of golf, but would you have the same confidence to bet against him in investing?

Ted Seides, CFA, President and Co-CIO at Protégé Partners did just that. He bet Warren Buffett back in 2007 that hedge funds would outpace the S&P 500 over the next ten years. Mr. Buffett has been on the better side of this bet for the past seven years, as the S&P 500 has outpaced hedge funds. Will this continue for the next three years?

Mr. Seides authored a great article regarding the first seven years of this wager. He does an excellent job of showing if this underperformance is due to high fees associated with hedge funds or the investment environment of the past seven years. This also brings us to the active management versus passive management argument that forever lives on. What do you think? Will the S&P 500 continue this momentum due to solid fundamentals and low interest rates? Or will the investment environment change which will lead to a comeback for hedge funds?

Personally, I am a traditionalist, believing in the traditional asset classes – U.S. equities, fixed income, cash, and foreign equities. I also believe there is a spot for alternatives such as hedge funds in most portfolios, so I guess that makes me a “diversifier” or a “diplomat”. Furthermore I believe that the current investment environment will change, but will this help hedge funds and hurt the S&P 500 or vice versa? We will have to wait another three years to find out if Mr. Buffett or Mr. Seides comes out on top.

Click here to read Mr. Seides’ entire article posted on the CFA Institute website.

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