Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

Re:Buffett wins $1M decade-old bet that the S&P500 would out... by Retric on Monday September 18, 2017 @06:11AM (#15274587)

Supose they had a 10% chance the fund is worth nothing in a given year. Over 20 years there is only ~12% chance a given fund makes it but taking such risks significantly boosts returns. Further, assume many such funds and you are only looking at the lucky ones.

This is why you need to make predictions of performance ahead of time instead of analyzing past performance.

PS: A standard trick is to start 20 funds and the 'best' one has high returns. Create another 20 funds to have a new 'best' when the old one reverts to the mean. Thus you need to analyze total returns weighted by funds size of a company not just individual funds.

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Re:Buffett wins $1M decade-old bet that the S&P500 would out... by dsacco on Monday September 18, 2017 @09:05AM (#15275465)

This doesn't reflect how the industry actually works among funds that have alpha.

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Re:Buffett wins $1M decade-old bet that the S&P500 would out... by Retric on Monday September 18, 2017 @09:45AM (#15275838)

Clearly funds try and avoid going broke. However, many funds also have losses much greater than the market including the one we are talking about.

The truth is risk is hard to measure accurately and most Alpha is simply risk hidden from their investors.

Which is why a statistically significant Alpha takes more than a single funds past performance. And how someone just lost a 1 Million dollar bet on this crap.

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