>how hard it is to be a good active investor, basically exactly what Warren Buffet thinks
In broad brush strokes, yes. However this blog post uses a different math scenario.
- Warren Buffett's premise for winning the bet was the hedge funds' 2% "management fee" and 20% carry. Therefore, any attempt to beat Warren's passive investing starts with a handicap of minus-2% and has to have bigger positive returns that overcome it.
- This essay is about long-term "God clairvoyance" of _eventually_ being correct is negated by short-term negative returns which make people "fire" God. E.g. the investor might have a 2-year lockup of his funds before he can redeem them. E.g. After 2 years, the investor sees that the hedge fund is losing money -- but doesn't realize that it's a temporary dip. Therefore, he redeems his money (aka "fires God") and never got see that God was ultimately correct.
(Or put another way, if the lockup period and the fund's entire lifetime were exactly the same, the blog post couldn't be written.)
I've seen (and implemented in code) some pretty brutal liquidity algorithms. I've no doubt God could use such algorithms to always ensure positive performance on those dates on which liquidation is possible.
Funds might be locked up for two years, and afterwards only redeemable on the first day of the fiscal quarter. On the first liquidation event, only 25% of the funds are redeemable. If you submit notice on the first day of the next fiscal quarter, 33% is redeemable, followed by 50% and 100%. If you miss a quarter, the sequence starts over.
In broad brush strokes, yes. However this blog post uses a different math scenario.
- Warren Buffett's premise for winning the bet was the hedge funds' 2% "management fee" and 20% carry. Therefore, any attempt to beat Warren's passive investing starts with a handicap of minus-2% and has to have bigger positive returns that overcome it.
- This essay is about long-term "God clairvoyance" of _eventually_ being correct is negated by short-term negative returns which make people "fire" God. E.g. the investor might have a 2-year lockup of his funds before he can redeem them. E.g. After 2 years, the investor sees that the hedge fund is losing money -- but doesn't realize that it's a temporary dip. Therefore, he redeems his money (aka "fires God") and never got see that God was ultimately correct.
(Or put another way, if the lockup period and the fund's entire lifetime were exactly the same, the blog post couldn't be written.)