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Second Quarter 2016 - "Rethinking Hedge Funds"

In late 2007, Warren Buffett challenged hedge fund-of-funds Protege Partners to a bet. Mr. Buffett wagered $1,000,000 that an investment in the S&P 500 would be worth more after ten years than an equal investment in five fund-of-funds selected by Protege. The market was merciless from the start, delivering a global financial crisis that provided a very strong start for the hedge fund portfolio. Fast forward to today, and Mr. Buffet is in a very solid position; the S&P 500 has delivered 66% over that period, while Protege鈥檚 selection of fund-of-funds (which it has chosen not to disclose) has delivered 22%. With all due respect to the old adage 鈥渋t鈥檚 not over until it鈥檚 over,鈥 the outcome does not look promising for Protege. In 18 months, Mr. Buffet鈥檚 chosen charity 鈥 Girls Incorporated of Omaha 鈥 will likely be receiving a Protege-signed check for $1,000,000, or the equivalent of about five shares of Berkshire Hathaway Class A stock...

Client Letter 2016Q2 Duplex.pdf625.14 KB