FourSquare

We introduced the Charlotte Square brand in the early part of 2017. Like Newton Barr, CSQP places great emphasis on the importance of individual, face to face, communication with our clients. In addition, however, we now plan to contact you periodically by email to highlight an issue - just one - which we think you'd benefit from knowing about.

 
So, this is the first of our Foursquare bulletins.

You'll receive Foursquare on a regular basis going forward. We've decided that, in each addition of foursquare, we'll look to capture just one particular issue or thought or sentiment rather that attempt to be too broad.

The first addition should ring bells with you as it focuses on an issue which we at Newton Barr will have spoken about many times in the past as it's particularly central to our philosophy on investing your assets. To an extent, we've always felt a little like we've been swimming against the tide when advocating that our clients turn their back on active fund managers and instead use only (or largely) passive funds to achieve their investment objectives.

Though the evidence supporting such a stance is pretty compelling, clients are intuitively drawn to active fund managers - enticed by the possibility of outperformance. So, somewhat surprisingly, Warren Buffet has come to our aid with his recent pronouncements on the active fund management industry . Have a read and let us know what you think.....

Gerry Seydak

With 2017 over, Warren Buffett has sealed his victory over hedge funds in a bet he made a decade ago.

The Berkshire Hathaway chairman in 2007 bet $1 million that the S&P 500 would outperform a selection of hedge funds over 10 years.

As of Friday, his S&P 500 index fund had compounded a 7.1% annual gain over that period. The basket of funds selected by Protégé Partners, the managers with whom he made the bet, had gained 2.1%, according to The Wall Street Journal.

Buffett agreed to give the prize money to Girls Inc. of Omaha, Nebraska, a nonprofit he has previously supported.

Each side first put $320,000 into a zero-coupon Treasury bond that they estimated would be worth $1 million by 2018. But it was moved into Berkshire Hathaway's class B shares when the bond's value rose faster than expected. The 11,200 shares they bought in 2012 were worth $2.22 million on Friday, The Journal noted.

Buffett has long taken issue with hedge funds' promise of outperforming the market and their high fees that take away from the returns their clients earn.

He has turned out to be right on both fronts.

Actively managed funds have seen outflows while passive funds have gained since the financial crisis. Meanwhile, an abundance of exchange-traded funds has made it cheaper and easier for investors to buy into just about any group of stocks.

"My guess is that doubling down on a bet with Warren Buffett for the next 10 years would hold greater-than-even odds of victory," Ted Seides, a founder of Protégé Partners, wrote in a concession piece on Bloomberg View in May. "The S&P 500 looks overpriced and has a reasonable chance of disappointing passive investors."