Blaming fees is not only false but disingenuous. It takes large amounts of data over many decades to address whether active managers underperform after fees. Even if they underperform on average, there would only be about a 51 percent chance that a specific fund would underperform in a specific decade. Given Buffett’s goal to educate the public about investing, it would have been irresponsible to rely on a bet that was almost as likely to do harm as good. And I’m confident that if the bet had gone the other way, neither Buffett nor the other commentators would have changed their minds about the value of active management, making it less than honest to use the win to insist other people change. What does the bet actually prove? Nov 10, 2017. Eventbrite - The New Movement-ATX presents Sure Thing - Friday, November 10, 2017 at The New Movement Downtown, Austin, TX. Find event and ticket information. Jul 26, 2017. FSU might be one of the three best. Will their record convey that? Mar 7, 2017 - 4 min - Uploaded by The VoiceA devoted young father who grew up in a rough neighborhood pulls out all the stops with his. Siedes chose funds with a 0.97 correlation to the S&P 500. You can’t get this by accident or by choosing investments related to S&P 500 stocks; you need to buy S&P 500 stocks. You can tinker with the weights, or add a side-bet, but basically you’re running an S&P 500 index fund. And even if tweaks return 10 percent per year, since they represent only 5 percent of risk, you beat the S&P 500 by only 0.5 percent. Seides paid a suicidal 3.25 percent for side-bets. Nevertheless, that was not the reason he lost. Seides selected funds that went up and down only 56 percent as much as the S&P 500. The only way for Seides to win the bet is if the S&P 500 went down so much over the 10 years -- more than 7.5 percent per year -- that avoiding 44 percent of the losses overcame the 3.25 percent fee. The S&P 500 had negative 10-year returns only twice since 1871 and never lost 4 percent per year, much less 7.5 percent. It’s strange that Seides conceded the bet when his funds were down 34 percent to the S&P 500. The S&P 500 has lost more than 34 percent four times, so he had more chance of winning at that point than he did when the bet commenced. Therefore, the lesson of the bet is like the curious incident of the dog in the nighttime: not who won the bet, but why no one offered a portfolio with a fighting chance of winning. There are reasons a manager might decline. We are delighted to announce Sure Thing! Has been awarded 'Best Car Insurance Provider' & 'Best Insurance Broker' at the Insurance Choice Awards 2017. We were up against some of the biggest and best known insurers in the market, including Admiral, Aviva & LV= so we are thrilled to have been recognised. Directed by Bobby Mercer. With John Wilkins III, Kahil Dotay, Gregory Divers, Malik Big Leak Smith. The bet is not a good test of hedge-fund value, and a manager might prefer to avoid misleading the public. Many managers shun publicity and few want investors who misunderstand their fund’s value proposition -- which has nothing to do with beating the S&P 500 over 10 years. There are compliance and contractual issues in publicizing performance. Still, you might expect one manager defend the honor of the industry. Perhaps the key is that in 2007 there was excessive enthusiasm for hedge funds, and managers’ main problem was discouraging unrealistic expectations. Losing the bet would be embarrassing, but winning it would be worse, further misleading the public and attracting investors who could never be satisfied. Buffett did win the bet. Not by finding a patsy, and not because the laws of probability made his bet a virtual sure thing. He stood up courageously when opinions of hedge funds were foolishly high and his willingness to back index funds in dramatic public fashion -- and the unwillingness of managers to accept his challenge -- probably saved many investors from costly investment errors. Unfortunately, he and his fellow travelers are undoing the good today by misrepresenting the lesson of the bet. Bloomberg Prophets Professionals offering actionable insights on markets, the economy and monetary policy. Contributors may have a stake in the areas they write about.
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