It's no secret that the HF industry has been under a lot of pressure lately. The industry bled more than $100 billion in 2016 as fund flows moved into ETFs an other passive investment vehicles. It's also no secret that net returns have lagged behind the general market, though HF risk characteristics differ dramatically from publicly traded, blue chip stocks. Recently Warren Buffet made some news by winning a $1 million bet with major HF managers. The article is linked below but here's an excerpt:
Specifically, Buffett offered to bet that over a ten-year period from January 1, 2008, to December 31, 2017, the S&P 500 index would outperform a portfolio of hedge funds when performance is measured on a basis net of fees, costs, and all expenses. Hedge fund manager Ted Seides of Protege Partners accepted Buffett's bet and he identified five hedge funds that the predicted would out-perform the S&P 500 index over ten years.
As I reported last September on CD, Buffett's now-famous bet was actually settled early and ahead of schedule, because the outcome was so one-sided in favor of the S&P 500 index over hedge funds:
The Oracle of Omaha once again has proven that Wall Street's pricey investments are often a lousy deal. Warren Buffett made a $1 million bet at end of 2007 with hedge fund manager Ted Seides of Protege Partners. Buffett wagered that a low-cost S&P 500 index fund would perform better than a group of Protege's hedge funds. Buffett's index investment bet is so far ahead that Seides concedes the match, although it doesn't officially end until Dec. 31.
Given the poor risk/return performance of the industry, and the dramatic returns promised in ICOs and in cryptos in general, one would expect a greater proportion of managers to invest in this controversial space. I mean Ethereum is up 130% this month alone. Peter Thiel made some news recently (also linked below) by making millions in bitcoin. I've also received some messages/spoke to a number of individuals who told me that their funds are secretly trading in cryptos to bump returns.
So my question is how prevalent do you think this is and would you feel comfortable if your HF manager was throwing your money around in this space?
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