Hedge Funds Are Terrible Investments. So Why Do Rich People Keep Using Them? - How Money Works | How Money Works

Hedge Funds Are Terrible Investments. So Why Do Rich People Keep Using Them? - How Money Works

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In 2008 Warren Buffett made a bet for 1 million dollars that a hand selected group of hedge funds could not outperform the S&P 500 Index over a ten year period.

In 2018, Buffett won the bet, and went home an extra million dollars richer (which I am sure was a very big deal for him)

This exposed a big flaw in the investment industry which is that actively managed funds and in particular hedge funds struggle to outperform the general market.

When fees are considered there is only a handful of funds that have returned money to their investors in excess of what they would have received had those investors just taken a more traditional investment approach.


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