Capital Group CEO Lends Perspective To Warren Buffett Charity Bid

The lauded business magnate, Warren Buffett went head to head with the asset management and financial advisory firm, Protege Partners some eight years ago in a charity contest – the contest being: bet on a fund or funds and whoever makes the most amount of money off of it wins with the proceeds going to charity.

Buffett bet on a rather banal seeming standardized S & P 500 passive index fund whereas Protege decided to go for a more diversified and complex investment strategy. Eight years after the contest was formalized it looks as if Buffett will win out by a considerable margin (the winner will be decided this year), however, notable businessman, Timothy Armour, is not quite so sanguine about the affair or rather more specifically, about Mr. Buffett’s investment strategy.


While it is true that passive index funds can be a useful and often profitable component of any investor’s portfolio and while it is also true that Buffett’s S & P 500 fund outperformed the five hedge funds selected by Protege this does not in anyway mean that passive index funds are the best or safest investment strategy.

According to Mr. Armour, the greatest weakness of a passive index fund is the way that they open up investors to market volatility; for instance, in a bad or “down” market, a standard passive index fund offers one who has placed their funds within it absolutely no safety net – and that can lead to huge losses in the long run.

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