The Oracle of Omaha is making it once again very clear that he thinks Wall Street is full of snake-oil salesmen in overpriced suits.
During the weekend-long finance nerd bacchanalia known as the Berkshire Hathaway annual meeting, Warren Buffett opined on his disbelief in the slick stupidity of Wall Street investment consultants and the dupes who pay them...
Per WSJ, Buffett referred to a 2008 bet he made with hedge fund Protege Partners that Protege could pick any five fund-of-funds and track their cumulative returns over the next decade. Buffett wagered that they would get beat by the Vanguard S&P 500 index fund.
Warren gave an update on the bet:
Mr. Buffett showed a chart comparing the cumulative returns of the two sides of the bet since 2008. As of the end of 2015, the S&P 500 index fund had a cumulative return of 65.7%, outdoing the hedge fund teams’s 21.9% return. The S&P has outperformed in six of the eight individual years of the bet too.
But The Oracle wasn't done kicking sand and went ton to sound downright gleeful about a future that includes Dan Loeb's Valley of Fiery Hedge Fund Death...
“Supposedly sophisticated people, generally richer people, hire consultants, and no consultant in the world is going to tell you ‘just buy an S&P index fund and sit for the next 50 years.’ You don’t get to be a consultant that way. And you certainly don’t get an annual fee that way. So the consultant has every motivation in the world to tell you, ‘this year I think we should concentrate more on international stocks,’ or ‘this manager is particularly good on the short side,’ and so they come in and they talk for hours, and you pay them a large fee, and they always suggest something other than just sitting on your rear end and participating in the American business without cost. And then those consultants, after they get their fees, they in turn recommend to you other people who charge fees, which… cumulatively eat up capital like crazy.”
And Warren doesn't so much dislike the greedy fee-grubbing as much as he resents how much these guys suck at investing.
“There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” he said. “There are a few people out there that are going to have an outstanding investment record. But very few of them. And the people you pay to help identify them don’t know how to identify them. They do know how to sell you.”
“That’s my message. We’ll come back at one o’clock.”
Buffett then dropped the mic, grabbed a can of Coke and headed off to lunch with his homies.