During 2015 and 2016 one of the most interesting storylines in the field of finance was a bet made between Warren Buffet and several hedge funds and mutual funds. Warren Buffet, who is commonly referred to as the “Oracle of Omaha” due to his investment success made a bet stating that he could get a better return on investment putting some money into a low-cost index fund than he could investing in a variety of mutual or hedge funds.
The premise that Buffet made goes along with his long-term approach to investing in low-cost funds. However, many hedge fund managers have stated that it would be more beneficial in the long-term to invest in actively managed funds. While they may be more expensive, they provide an investor with more downside protection and investments in growing markets.
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Ultimately, the end of 2016 proved Warren Buffett that he was the winner of the bet. While Buffet was proven successful in this bet, some experts believe that this should not change investors’ focus away from actively managed funds. One continued proponent of actively managed funds is Tim Armour, who is the principal of the Capital Group.
Tim Armour stated that it was clear that Buffet won the bet, but that was partially due to the fact that the bet took place during a positive year of investing. Had the bet taken place during a down year or recession, the actively managed funds would have likely outperformed significantly. This is because hedge and mutual funds also take downside protection investments, which reduces risk. Armour stated that there strategy has outperformed the S&P 500 by more than 1.5% over the past 20 years.
Tim Armour has worked for the Capital Group for over 20 years. In this time, he has spent a considerable amount of his efforts working on investment management and recurring asset management. This effort has helped to protect long-term returns and investor capital.