Investment manager Timothy Armour has a different take on investing in hedge funds than Warren Buffet does. Mr. Buffet claims that he will see better returns if he just invests his money into a S&P 500 passive index fund rather than several hedge fund managers. Buffet’s claims do have some merit explains Timothy Armour. He is right, continues Armour, that most hedge fund managers charge their customers exorbitantly high fees and fail to deliver good results. Tim Armour does not argue with Buffet on that front, but he believes that there are several hedge fund managers and companies that deliver good results that can exceed that of a simple S&P 500 passive index fund.
Timothy Armour states that finding a hedge fund manager that can deliver good results and that will beat Buffet’s plan requires you to do two simple things. The first is to look at a hedge fund company’s fees. If they are high, then don’t go for them. Go for a fund that offers low fees. The next and most important thing to look at is whether the fund manager has his own funds or bottom line invested into the fund. This will motivate the fund manager to deliver not only for you but himself as well.
By going for hedge funds with low fees and money that is their own in the fund, you can safely say that the fund will outperform those who charge high fees and are not motivated to do their best. Such funds have routinely outperformed other hedge fund managers and even investments in a passive index fund in the S&P 500 that Buffet suggests.
Timothy D. Armour is the present board chairman and chief executive officer of the Capital Group. He was appointed in these roles at the Capital Group on July 28, 2015. Mr. Armour completed an economics program at Middlebury College in Vermont. He has been working at the Capital Group for over 34 years before being appointed CEO and board chair.
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