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Oh my goodness are you guys ready for a sad sad story that involves the hedge fund industry the hedge fund industry an industry that has over three trillion dollars under capital how much of a bunch of crap hedge funds are i’m gonna explain this to you guys here today okay this investor who lost to warren buffett on a bet says hedge funds could beat the markets but
It’s not their goal hedge funds are beating the market for the first time in ten years and investor ted seeds told cnbc it is possible that they can do so over the next decade because anything can happen in the markets last year seeds lost a ten-year bet he made with billionaire warren buffett that hedge fund performance would top that of the s&p 500 so they
Couldn’t even beat the the s&p 500 guys these hedge fund managers he took the bait from buffett when he was founder and president of prestige partners an alternative investment firm then invested in established small and select emerging hedge funds however seeds now managing partner and advisor at hidden brook investments told cnbc’s lesly lesly picker on
Power lunch wednesday that hedge funds are really more focused on delivering an equity like stream that has a low correlation to the market hedge funds really don’t try to beat the market he said could it happen sure how might happen these type of market conditions to higher rates more volatility more trading all that type of stuff in fact these conditions have
Helped the hedge fund managers and the three point two trillion dollar hedge fund industry post a point three eight percent gain in april that brings a total return for the year to 0.39% the h f ri fund weighted composite index finished april narrowly ahead of the s&p 500 first time in ten years and they barely did better than the s&p 500 guys i want to
Expose these hedge funds today because this is such a such a waste of an industry think about this for a second okay these guys make hundreds of millions of dollars sometimes billions dollars a year and they can’t even beat the s&p 500 meaning you know if the the market goes up 8% a year they can’t even get an 8% return for their clients and these head guys
Have billions upon billions if not tens of billions if not hundreds of billions of dollars under you know asset management these guys can’t even beat the markets and yet people are going with them and given them their their money oh oh i’ve made all this money from my business or whatever here take this money and vest it for me and these guys aren’t even beating
The markets guys what they basically do okay they they come up with some fancy name for their or their hedge fund okay some fancy name that sounds like so strong and so like manly you know prestige partners or whatever you know just well they like manly names they come up with some fancy name and then they basically go out there and sell they basically go out there
And sell nothing wrong with that everybody needs to sell right but they sell that they’re such great investors when these guys aren’t even beat in the market okay they’re they’re selling oh you need to come and invest with me come and give me your your hundred million dollars that you made from your business come and give me all this money i got billions of dollars
And what they do is once they get a bunch of money pooled together that they’re already investing then they use that money as another selling point okay so once they start getting billions of dollars you know under management once they start getting billions all it’s on now everybody thinks old man they already got five billion dollars under asset management well
They must be great investors you know so many people believe in them well look at the numbers they’re doing okay and they start using that to their advantage and when you already have that much money it’s not complicated on how you can make so much money from it right because these guys take two and twenty okay so if you know anything about the hedge fund industry
They take two and twenty percent basically meaning they’re gonna take two percent whether the whether that fund grows shrinks anything they’re taking two percent off the top okay so if they got a billion dollars under management they’re taking two percent of that that year okay regardless of whether they they they made money lost money then any of the profits they
Made for that hedge fund okay they get 20 percent of the profits they get 20 percent of the profits guys that is insane okay think about if they you know just let’s think about last year okay a year or the market went up twenty something percent they didn’t even have to beat the market if they just they just you know there are clients they got them you know same
Amount of gain the s&p went up or even a little less think about if they have billions of dollars on their management and they get that type of gain imagine what type of money and then you can understand very quickly how these guys can make hundreds of millions of dollars or billions of dollars a year but the fact is they’re not even being the markets okay
They’re not even making as much money as a market they had ten years to do it and they couldn’t even do it guys ten years the reason warren buffett felt comfortable to take this bet is not because he thinks hedge fund managers are stupid or they’re all bad investors or anything like that warren buffett took this bet because he understands human psychology okay
So what these hedge funds do is they don’t really yeah they’re not gonna care about the the the percent of game because most people out there you know even the wealthier people they don’t really understand oh you know this guy should be beating the market or something they just understand that they need to put their money somewhere that hopefully that money can
Grow okay over time not even knowing the markets goes up you know somewhere around 8% a year so they got this fancy name they got you know all this money already under management they got this super nice office all these secretaries and whatnot it looks like you know super legit and obviously you know a ton of people already invested them and it’s just easier and
Easier to get people through the door people don’t realize these guys aren’t even doing anything special for you you could just be in an index fund and and guess what a lot of index funds that are you gonna take that percent out of you okay these guys are taken so much of the money it took to even you know let’s say they get a return of 7% a year they take 2% every
Every you know bachelor round you’re getting way lesson that never mind all the other fees on top of it guys it’s absolutely insane but it’s so easy for them to do it now back to the point on why warren buffett felt comfortable making this bet the reason being is these hedge fund managers they’re just trying not to turn off clients all right they’re just trying
Not to turn off clients their their job is just to attract more clients more money pull more more money together because once again they’re getting two percent of however much money so the more money you got in there the more money you’re getting as a hedge fund manager right so their job was just a pool money together so they don’t want to screw up real bad so
They never take any rest out there okay they never really take any real risk they never invest big in a company if a company starts to sell off what do they end up doing the end up selling that stock their investing strategy is a losing strategy it’s a losing strategy which is why they can’t even beat the markets okay it’s a losing strategy that whole strategy
Of let me buy a stock oh it’s starting to sell off let me sell it and let me well you know buy this other one that’s going up right now that’s a losing investment strategy okay that does not make money over time a business decision is not my stock fell three percent today i want to sell that stock that’s not a business decision that’s a gambling decision okay
That’s another business decision a business decision would be this company’s revenues are now going down i don’t want to be in it because the revenues are going down or this is going down or the edges of this business i didn’t want them to be in or something like that or something bad happened okay or the ceo left the company i don’t want to be in this position
Nell’s of business decisions whether that stock price went up a few percent down a few percent you didn’t move it all that has nothing to do with what a decision making process should be it’s a losing strategy but that’s what these guys are doing okay and that’s why they can’t even beat the markets because they’re just trying not to turn off tons of people okay
So they’re trying not to get in the stock that let’s say say they believe in the stock a lot over the long term but wall street’s kind of not in favor with it they don’t really want to invest in that stock because if that stock drops let’s say 20 30 percent and also their customers start looking at me like whoa that stocks down 20 30 percent you got a lot of our
Money in that what are you doing they can’t do that guys they can’t do that because it could potentially turn off clients and if they turn off those clients then this money starts to go down and down and down because these people don’t even really care about the percent of return they get they just care that you know hopefully they make some money over time and
Their money safe there it’s it’s such a bunch of crap guys you know people should realize just the investment index funds or something like that at that point in time guys it’s crazy to be given these hedge fund managers all those money to manage three point two trillion dollars and these guys can’t even beat the markets what’s their utility what’s their utility
You’re just making them super rich they’re not doing anything for you and they’re certainly not doing anything special for you out there okay i’m like my goodness guys it’s absolutely insane but that’s just what it goes on they don’t want to take risks they don’t want to do this or do that they’re just trying to you know stay in line trying to you know be as good
As the guy next to them and the in the hedge fund across the next big building in new york city right there’s try and do it as good as that guy in those windows over there or somewhere near that that’s all you know whether they get 20% return 10% return or 5% return they’re kind of looking at it doesn’t really matter to us it doesn’t really matter us we just need
To pool more money together guys it’s just craziness so it was an easy bet for warren buffett to win but it i’ve really exposed the hedge fund industry these these guys had 10 years couldn’t even beat the market couldn’t even beat the market we’re not even talking about–we outperform it they couldn’t even beat it guys so anyways i hope you enjoyed this let me
Know what your opinion is down there in that comment section is always about hedge funds and whatnot i would love to know your guy’s opinion on that make sure you follow me on instagram if you have not already i’m gonna start going live on there at least like it once every couple weeks and whatnot so taking live q&a and doing those type of things so anyways
Thank you for watching and have a great day
Transcribed from video
Warren Buffett Destroys Hedge Fund Manager in 10 year bet By Financial Education
