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Strange that he doesn't even mention let alone discuss that the primary reason he lost may just be the reason Buffett originally cited which was the high fees o

Strange that he doesn't even mention let alone discuss that the primary reason he lost may just be the reason Buffett originally cited which was the high fees of hedge funds/active management. That in most if not all market conditions, high fees preclude a better average return than index funds. The only reason Seides provided which I found somewhat persuasive was that hedge funds tend to do better in downturns -- this is probably a traditional hedge fund that's actually hedged. I wonder if adding such hedging to an index fund in an automated way would improve performance or not?! Not sure if it's been tested.

valuearb 9y ago
Yea, it's actually likely that many investment managers have skills that can beat the market. But it's been proven that the vast majority cannot, after fees. Those that have "skill" have an edge that is so thin that 2% a year evaporates it (mutual funds). With Hedge Funds charging 2% + profit share, it's an even heavier burden. Guys like Buffett that beat the market by 7-10% a year over decades are nearly unicorns in rareness.
- paulmd 9y ago
  The secret is that Buffett isn't beating the market by 7-10% a year over decades. He's not a hedge fund prodigy, he's a management prodigy. His companies beat the market because he is the antithesis of the quarterly-numbers-driven model of Wall Street. He focuses on fundamentals, long-term value, and having leadership that's on the same page. He makes sure his businesses aren't underspending on fundamentals or overspending on inessentials, and then he gets out of the way. Saying that Buffett "beats the market" is like saying that a sports coach is really good at picking winning teams. His companies outperform the market because Buffett enables them to outperform the market. (on top of that, yes, he's a savvy investor and he's made some ballsy calls - but absent his management I doubt you would see him doing better than the 2% that other actively-managed funds can earn above the market return)
  - adventured 9y ago
    Your information is incorrect. As an investor - not as a manager - Buffett stomped the market for decades prior to the modern concept of Berkshire Hathaway becoming the business model. Numerous other Graham disciples likewise stomped the market over long periods of time. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup... Going further, other well-known value investors applying similar approaches (by their own admission), stomped the market as well. Those include the likes of Phil Fisher and Seth Klarman. The out-performance isn't subtle, it's dramatic, and it takes place over long periods of time.
    - davidivadavid 9y ago
      How many Graham-trained "superinvestors" never beat the markets, though?
      - axlprose 9y ago
        What "superinvestors" are you alluding to here? Are you suggesting that getting investment advice from Graham is sufficient to reproduce the kinds of returns he and Buffett have had? Because that seems like an unrealistic expectation, and a totally orthogonal argument to whether or not investors can "beat the market". It's like talking about Google and then asking how many other Stanford CS grads never went on to start successful tech companies. Learning from somebody good doesn't automatically guarantee you'll end up being as good as them afterwards, for a variety of factors.
        isolli 9y ago
        The point was about selection bias: just because you can observe n successful Graham investors in the wild does not tell you how many Graham investors there were to begin with. Nor does it tell you whether the proportion of successful Graham investors is greater than the proportion of successful investors from other schools.
        paulmd 9y ago

valuearb 9y ago

Yea, it's actually likely that many investment managers have skills that can beat the market. But it's been proven that the vast majority cannot, after fees. Those that have "skill" have an edge that is so thin that 2% a year evaporates it (mutual funds). With Hedge Funds charging 2% + profit share, it's an even heavier burden. Guys like Buffett that beat the market by 7-10% a year over decades are nearly unicorns in rareness.

paulmd 9y ago
The secret is that Buffett isn't beating the market by 7-10% a year over decades. He's not a hedge fund prodigy, he's a management prodigy. His companies beat the market because he is the antithesis of the quarterly-numbers-driven model of Wall Street. He focuses on fundamentals, long-term value, and having leadership that's on the same page. He makes sure his businesses aren't underspending on fundamentals or overspending on inessentials, and then he gets out of the way. Saying that Buffett "beats the market" is like saying that a sports coach is really good at picking winning teams. His companies outperform the market because Buffett enables them to outperform the market. (on top of that, yes, he's a savvy investor and he's made some ballsy calls - but absent his management I doubt you would see him doing better than the 2% that other actively-managed funds can earn above the market return)
- adventured 9y ago
  Your information is incorrect. As an investor - not as a manager - Buffett stomped the market for decades prior to the modern concept of Berkshire Hathaway becoming the business model. Numerous other Graham disciples likewise stomped the market over long periods of time. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup... Going further, other well-known value investors applying similar approaches (by their own admission), stomped the market as well. Those include the likes of Phil Fisher and Seth Klarman. The out-performance isn't subtle, it's dramatic, and it takes place over long periods of time.
  - davidivadavid 9y ago
    How many Graham-trained "superinvestors" never beat the markets, though?
    - axlprose 9y ago
      What "superinvestors" are you alluding to here? Are you suggesting that getting investment advice from Graham is sufficient to reproduce the kinds of returns he and Buffett have had? Because that seems like an unrealistic expectation, and a totally orthogonal argument to whether or not investors can "beat the market". It's like talking about Google and then asking how many other Stanford CS grads never went on to start successful tech companies. Learning from somebody good doesn't automatically guarantee you'll end up being as good as them afterwards, for a variety of factors.
      - isolli 9y ago
        The point was about selection bias: just because you can observe n successful Graham investors in the wild does not tell you how many Graham investors there were to begin with. Nor does it tell you whether the proportion of successful Graham investors is greater than the proportion of successful investors from other schools.
      - paulmd 9y ago