Fans won

The term of one of the most famous financial bets in the world expires: Warren Buffett against professional investors

At the end of 2017, a bet, which was concluded ten years ago by one of the richest people in the world, Warren Buffet with investors from Protégé Partners. The essence of the dispute is as follows: Buffett claimed that the most profitable investment in America is just to invest in the S&P 500 broadcast index, and its opponents are that they will come up with such hedge funds (the promotions are selected there), which will cost S&P 500 at ten years of age. Buffett won.

“In the 2005 Berkshire annual report, I argued that active investment management of professionals in a certain period of time would be less profitable than amateurs who did nothing. I explained that solid payments to various “assistants” will leave their customers - again, in the aggregate - in a worst position than fans who simply invested in a low -cost index fund, who are not managed, ”Buffett wrote in a letter to the shareholders of Berkshire Hathaway Inc. In 2016.

Ten years ago, Buffett proposed to any of the investors working with hedge funds on this topic. He responded to him by the head of Protégé Partners Ted Saides Seides. As a result, they both invested 330 thousand dollars-a buffet in the Vanguard 500 index fund, based on the S&P 500 index , and Protégégé Partners-in five funds investing in a hundred hedge funds controlled by professionals. The loser must give a million dollars to charity.

In 2016, Warren Buffett wrote that according to the results of nine years, he clearly wins - over the past time the profitability in the index fund exceeded 85 percent, while the average profitability of the five “funds” amounted to about 22 percent.

“I am sure that in most cases managers at both levels [hedge funds and higher funds] are honest and smart people. But for their investors, the results turned out to be sad-truly sad, ”Buffete wrote. He noted that hedge fund managers can make significant profits even in case of unsuccessful investments. According to his estimates, over the nine years of dispute, the managers got about 60% of the total profit received by these five funds.

Ted Saides in May 2017 recognized the defeat. At the same time, he noted that the winnings of the buffet are associated not only with the greater managers' fees. He indicated, in particular, that the S&P 500 index chosen by Buffet is focused on large American companies that showed growth in recent years; Head funds are more focused on international companies-and indices, which include similar companies, showed an increase similar to the growth of hedge funds. He also noted that in the decreasing market the profit of hedge funds investors usually more than that of index fund investors.

Another Protégé Partners manager Jeff Tarrant added that in a sense he considers himself a winner, because because of a bet he was able to dine with a buffet for ten years.

There are no official results of the dispute yet - Protégé Partners have another week. Most of all, the winnings of the buffet will be even more impressive than according to the results of 9 years: S&P 500 grew by almost 20% in 2017 and updated the historical maximum. Donald Trump's presidency greatly revived the stock market - he, in particular, launched a tax reform , which, as expected, will improve the financial condition of large companies. Over 10 years, S&P 500 increased by 80%.

Against the backdrop of the completion of the dispute with Saeses, Buffete made another bold forecast-however, to find out whether he was justified or not, an 87-year-old billionaire is unlikely to be able to. According to him, the Dow Jones index over the next hundred years will reach a million points, that is, it will grow 40 times. According to CNN, a hundred years ago the index was about 300 times less (81 points).

Victor Davydov, Alexander Polivanov