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Yeah this bet was not a smart one for Ted given the terms. I'd gladly take it with a few slight revisions though: 1) The hedge funds don't have to be "funds-of

by dsacco 10y ago

Yeah this bet was not a smart one for Ted given the terms. I'd gladly take it with a few slight revisions though: 1) The hedge funds don't have to be "funds-of-funds", and 2) I can choose the hedge funds. But I suspect Buffett wouldn't take that bet. He strikes me as someone who doesn't take bets without knowing pretty well in advance that he'll win. It also sort of alters the claim from "hedge funds as an industry will beat the S&P 500 overall" to "elite hedge funds can consistently beat the S&P 500." But given that he is a fund manager, I have no idea what Seides was thinking trying to claim the former.

manyoso 10y ago
Yeah, its not like he gets paid to make smart bets or anything... oh wait!
- dsacco 10y ago
  Well it's good no one paid him for this bet because it was a shitty one. He could have chosen sensible options like Rentec or Baupost. Clear failure there...
RockyMcNuts 10y ago
It was Seides's idea to make it funds of funds and he could choose them - http://archive.fortune.com/2008/06/04/news/newsmakers/buffett_bet.fortune/index.htm http://archive.fortune.com/2008/06/04/news/newsmakers/buffet... 5 hedge funds I'm not sure would make a lot of sense, too small a number to diversify, funds wind down. The hedge funds were winning for the first few years with the crisis. A straight up stock market is not great for the hedge fund side. Also worth noting that Buffett is an active manager and claims he could beat the S&P by a large margin if he was managing a smaller portfolio. And he's said the efficient market theory is dumb and makes his job easier. He tells people to put their money into index funds and then does the opposite. From his perspective he's talking his own book, if there is another Warren Buffett level talent out there, no need to tell everyone to find the best competition and back him, might as well tell people they're wasting their time, just buy the index.
- dsacco 10y ago
  There are comparable talents to Warren Buffett, and Seides could have chosen them. If Jim Simons wasn't retired, I'd happily give up the legal right to invest in the S&P 500 ever again just to invest with him if that was somehow a requirement. Instead, Seides did...whatever this silly attempt was. I get that the "fund of hedge funds" clause was his idea, but it was stupid. I use the word "stupid" unironically, fully self-aware of potential Dunning-Kruger, and I reiterate - there was nothing sensible about his taking the bet at those terms. It was never a defensible position that hedge funds as an aggregate industry outperform the market - maybe before the turn of the century, but not after the market became saturated with every Tom Dick and Larry with a shingle outside their doors. Even if it fundamentally changes the goal of the bet, Seides should have had different terms if he really wanted to win.
  - firebones 10y ago
    I'm interested: with Jim Simons, is it some acumen you believe in, some method he employs, or some connections/stature that leads good deals to his door? For instance, with Buffett, it seemed his stature, historical perspective, and means allowed him to invest $5B in Goldman Sachs at the near height of panic, under terms that very few were able to get. (Caveat: I don't know anything about Simons, but I'm very curious about the basis for your claim/offer, knowing that in the HN crowd, you have a lot of industry experience.)
    - valuearb 10y ago
      Buffett will tell you value investing isn't just being good at valuing investments, its practicing dozens of little techniques to eliminate outside influences from your thought process, so you can make rational decisions in every market. Some smart investor fail because they can't control their own psychology. Read the Mr Market parable for an overview.
    - dsacco 10y ago
      I'm aware of what you're saying about Buffett (he is essentially an excellent and influential business magnate, not just an excellent investor), but it doesn't apply to Simons. He's a mathematician (Chern-Simons theorem), and his investing methodology is utterly different from Buffett's. Simons' firm, Renaissance Technologies, doesn't do value investing. They were one of the first hedge funds to do quantitative financial modeling. I suspect a lot of what they do is market making instead of purely directional trading, but it's hard to know since the fund is incredibly secretive. Simons' business connections or acumen in the traditional sense have nothing to do with the fund's success; it's entirely about the strategy they employ.

by dsacco 10y ago

manyoso 10y ago

Yeah, its not like he gets paid to make smart bets or anything... oh wait!

dsacco 10y ago
Well it's good no one paid him for this bet because it was a shitty one. He could have chosen sensible options like Rentec or Baupost. Clear failure there...

RockyMcNuts 10y ago

It was Seides's idea to make it funds of funds and he could choose them - http://archive.fortune.com/2008/06/04/news/newsmakers/buffett_bet.fortune/index.htm http://archive.fortune.com/2008/06/04/news/newsmakers/buffet... 5 hedge funds I'm not sure would make a lot of sense, too small a number to diversify, funds wind down. The hedge funds were winning for the first few years with the crisis. A straight up stock market is not great for the hedge fund side. Also worth noting that Buffett is an active manager and claims he could beat the S&P by a large margin if he was managing a smaller portfolio. And he's said the efficient market theory is dumb and makes his job easier. He tells people to put their money into index funds and then does the opposite. From his perspective he's talking his own book, if there is another Warren Buffett level talent out there, no need to tell everyone to find the best competition and back him, might as well tell people they're wasting their time, just buy the index.

dsacco 10y ago
There are comparable talents to Warren Buffett, and Seides could have chosen them. If Jim Simons wasn't retired, I'd happily give up the legal right to invest in the S&P 500 ever again just to invest with him if that was somehow a requirement. Instead, Seides did...whatever this silly attempt was. I get that the "fund of hedge funds" clause was his idea, but it was stupid. I use the word "stupid" unironically, fully self-aware of potential Dunning-Kruger, and I reiterate - there was nothing sensible about his taking the bet at those terms. It was never a defensible position that hedge funds as an aggregate industry outperform the market - maybe before the turn of the century, but not after the market became saturated with every Tom Dick and Larry with a shingle outside their doors. Even if it fundamentally changes the goal of the bet, Seides should have had different terms if he really wanted to win.
- firebones 10y ago
  I'm interested: with Jim Simons, is it some acumen you believe in, some method he employs, or some connections/stature that leads good deals to his door? For instance, with Buffett, it seemed his stature, historical perspective, and means allowed him to invest $5B in Goldman Sachs at the near height of panic, under terms that very few were able to get. (Caveat: I don't know anything about Simons, but I'm very curious about the basis for your claim/offer, knowing that in the HN crowd, you have a lot of industry experience.)
  - valuearb 10y ago
    Buffett will tell you value investing isn't just being good at valuing investments, its practicing dozens of little techniques to eliminate outside influences from your thought process, so you can make rational decisions in every market. Some smart investor fail because they can't control their own psychology. Read the Mr Market parable for an overview.
  - dsacco 10y ago
    I'm aware of what you're saying about Buffett (he is essentially an excellent and influential business magnate, not just an excellent investor), but it doesn't apply to Simons. He's a mathematician (Chern-Simons theorem), and his investing methodology is utterly different from Buffett's. Simons' firm, Renaissance Technologies, doesn't do value investing. They were one of the first hedge funds to do quantitative financial modeling. I suspect a lot of what they do is market making instead of purely directional trading, but it's hard to know since the fund is incredibly secretive. Simons' business connections or acumen in the traditional sense have nothing to do with the fund's success; it's entirely about the strategy they employ.