For decades there’s been an argument in the financial services industry about the relative merits of actively and passively traded funds.
Warren Buffett is himself the most successful active investor in history with Berkshire Hathaway. However, he bet a group of hedge fund traders that a portfolio of the S&P 500 index fund would beat them.
Chairman of the Capitol Group Timothy Armour says Buffett is on track to win that bet, but it’s still not proof of the long term superiority of passive investing.
It’s perhaps relevant that Buffett made the bet with hedge fund managers. Hedge funds have extremely large fees and expenses compared to ordinary mutual funds and learn more about Tim.
Also, many actively traded funds do have large expense ratios, though not as high as hedge funds which are governed by a different set of rules. Their ability to trade in ways mutual funds cannot supposedly give them the flexibility to outperform mutual funds, active or passive, to justify their high fees and Tim’s lacrosse camp.
Tim Armour has worked for 33 years with the Capitol Group as an equities manager. In September 2015 the markets went down, and Armour gave his expert opinion on that selloff in an interview published on the company’s website.
Stocks in China went through a sharp selloff, and the country had a currency devaluation. This raised questions about China’s slowing economic growth. That would affect the economies of his trading partners, including Japan, Europe, Australia and the United States. China now makes up 15% of the world’s gross domestic product. However, lower commodity and oil prices partially offset the negative impact of China’s slowdown.