BUF­FETT AGAIN SLAMS FUND MAN­AGERS

Den­tists, plumbers add more value in ag­gre­gate, says Berk­shire chair­man

New Straits Times - - Business -

SEAT­TLE as a group, com­pared with do­ing it your­self or just ran­domly pick­ing lay­men,” said Buf­fett. “In the in­vest­ment world it isn’t true. The ac­tive group, the peo­ple that are pro­fes­sion­als in ag­gre­gate, are not, can­not, do bet­ter than the ag­gre­gate of the peo­ple who just sit tight.”

Vice-chair­man Charles Munger said “it’s even worse than that” be­cause some hedge fund man­agers with a long ca­reer in the in­dus­try, known for charg­ing two per cent man­age­ment fees and tak­ing 20 per cent of prof­its, did well, at­tracted money and then lost it.

“The in­vest­ing world is just a morass of wrong in­cen­tives, crazy re­port­ing and I’d say, a fair amount of delu­sion,” said Munger.

Buf­fett also chal­lenged as he has in pre­vi­ous share­holder meet­ings, the “two and 20” com­pen­sa­tion model for hedge fund man­agers.

“If you even have a bil­lion dol­lar fund and get two per cent of it, for ter­ri­ble per­for­mance, that’s US$20 mil­lion (RM86.8 mil­lion),” said Buf­fett.

“In any other field, it would just

Buf­fett said gross do­mes­tic prod­uct per per­son in the US was six times higher now than when he was born, re­it­er­at­ing his op­ti­mism blow your mind.”

Buf­fett said the US$3 tril­lion hedge fund in­dus­try was “such a big game” that peo­ple were able to make “huge sums of money, far be­yond what they’re go­ing to make in medicine” or other pro­fes­sions.

“The huge money is in sell­ing peo­ple the idea that you can do some­thing mag­i­cal for them,” said Buf­fett. Bloomberg about the na­tion’s abil­ity to gen­er­ate wealth.

The US un­em­ploy­ment rate fell to 4.4 per cent last month, the low­est since be­fore the fi­nan­cial cri­sis, ac­cord­ing to Labour Depart­ment fig­ures on Fri­day. Bloomberg

REUTERS PIC

Berk­shire Hath­away share­hold­ers wait­ing for the start of the Berk­shire Hath­away an­nual meet­ing in Omaha, Ne­braska, on Satur­day.

BLOOMBERG PIC

Berk­shire Hath­away chair­man and chief ex­ec­u­tive of­fi­cer War­ren Buf­fett says peo­ple will be bet­ter off stick­ing their money in a low­cost in­dex fund.

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