Warren Buffett: Hedge Funds Get ‘Unbelievable’ Fees For Bad Results
Investors should be mad paying huge fees to hedge fund managers who fail to even match returns of index funds, Warren Buffett says.
“There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” the billionaire investor said during Berkshire’s annual meeting in Nebraska, Bloomberg reports.
Hedge funds usually charge a 2% management fee on all assets and take an additional 20% bite out of any profits, resulting in a “compensation scheme that is unbelievable to me,” Buffett says.
It seems like he's on to something—why pay more for worse results? An example: since 2008 Protege Partners has been using a strategy that invests in hedge funds and has returned 21.9%, but a simple Vanguard mutual fund that tracks the S&P 500 has returned 65.7% over the same period. [Bloomberg]