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  • narrog commented on Robert Abbott's article 01-15 23:57
    Warren Buffett vs. Hedge Funds: And the Winner Is…
    “Bogle’s Folly, as the first index fund was derisively described, seems to have morphed into Buffett’s Revenge.” --Barry Ritholtz On the...
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    narrog 01-15 23:57
    • @LwC. Thank you for your clarifying comment and the very welcome additional information. I think the problem is mainly in the wording. According to Seides' telling, in a recent interview with The Investors' Podcast, he was fully convinced at that time that he would win the bet. And he still believes that the main reason for losing it was timing (the S&P going on an almost unprecedented roll in the next ten years). On the other hand, with respect to the choice of funds, he also mentioned that he had to go with funds-of-funds because of legal issues with the bet arising if he had picked individual funds. Presumably these were issues like the evaluation of the outcome if one or more of the funds had closed shop during the period of the bet.

      So Seides was surely not "forced" to pick funds-of-funds, and he stood behind his picks and his bet, but it seems that he didn't have the choice to pick individual funds either. So,my wording he "had to" is in this sense . It is intriguing to think what would have happened if he had had the option to choose individual funds, and on top of that had actually done so, isn't it? Especially for us as subscribers of GuruFocus. After all, if we would not have the conviction that there ARE individual fund managers who have the ability to outperform a given index over an extended period of time -- and there wouldn't be data that support this conviciton --, we wouldn't be subscribing to this site, and instead put our money into an index fund. That's what I wanted to express.

      (I hope that I am not double posting this. I am trying to upload it for the fourth time.)

  • narrog commented on Robert Abbott's article 01-12 20:42
    Warren Buffett vs. Hedge Funds: And the Winner Is…
    “Bogle’s Folly, as the first index fund was derisively described, seems to have morphed into Buffett’s Revenge.” --Barry Ritholtz On the...
    View all 1 comment
    narrog 01-12 20:42
    • This is an intriguing issue. I suppose the outcome was mainly determined by (1) timing, as you write, and (2) negative factors in the structure of the average hedge fund, like (a) heavy cost structure and  (b) a strong tendency to clandestinely track the index because of performance pressure on the managers. (2)(a) and (b) combined practically "guarantee" underperformance.

      But I think Seides' lost especially because he had to bet on "funds of funds" because of legal issues in the contract with Buffett. That made him bet on a bunch of average funds that suffer from intrinsic structural problems. If he had chosen individual funds with a proven record of outperformance, like Renaissance or Howard Marks (Trades, Portfolio)' Oaktree, he could still have won it. I would have liked to choose those funds! (Who wouldn't?)

      The problem for us retail investors, unless we are really high net worth, is that the really good funds, like Renaissance, are closed to us. We have to go for the average 2-20 fund that is destined for underperformance. In this sense, the bet was representative.

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