By Simeon Stoitzev, Harcourt Investment Consulting
It is not the knowing that is difficult, but the doing.- Chinese Proverb
Once in a while commentators turn on the funds of hedge funds industry by criticising performance and fees. And lately, the industry has also been competing with replication strategies offered by investment banks and market indices. Warren Buffet has bet US$1 million that the S&P 500 will outperform a given fund of funds over a decade. The winner will donate the stake to a charitable organisation. Buffet has attributed a 60% probability to his winning the bet. It is a wise but also a brave bet, given that the bet is placed in times of above average price/earnings ratios (even more so if adjusted for cyclicality of earnings). However, a decade is a fairly long time and a probability not too far from 50% is a reasonable bet.
The following is on : http://www.thehedgefundjournal.com/managerwrites/index.php?articleid=85331322
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