Comments on: Why Warren Buffett is richer than the Hedge Fund managers - a tale of two business models http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/ Commentary on investing and events with distinct value tilt Thu, 28 Aug 2008 09:02:39 +0000 http://wordpress.org/?v=2.3.1 By: Varun http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-177 Varun Thu, 07 Aug 2008 16:32:57 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-177 The owning a business thing is just great in that case, I only thought it's the ways of investing, Long Termism Vs. The Hedge Fund Method, is what we were talking about in your article. The owning a business thing is just great in that case, I only thought it’s the ways of investing, Long Termism Vs. The Hedge Fund Method, is what we were talking about in your article.

]]> By: Arohan http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-174 Arohan Tue, 29 Jul 2008 14:15:17 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-174 @Varun, Thanks for stopping by and hope to have you visit regularly! There are many, including me, who believe that there is no difference in owning a business and owning an investment. In both cases, you own a piece of the business (outright versus partial). Ultimately the wealth or the net worth is determined by the assets you own, regardless of how you own it and the business decisions you make while owning the assets. The article was meant to point out precisely the difference between the two ownership structures and the effect it has on one's net worth over a long period. If two people are given same amounts of money, the way they choose to invest it may have a great impact on the net worth they end up with. The fact that Warren Buffet is the richest person on earth kind of ends all arguments about which investing method is better. Now of course, we are talking about different time horizons here, most of the hedge fund managers have been investing for shorter time than Buffett, so it is kinda difficult to say with conviction that some of them may or may not outperform Buffett over a long period. We can have a good discussion on this but may never know for sure (As an aside, there are stocks that have performed better than Berkshire Hathaway over the last 18-20 years. Leucadia National comes to mind) @Varun,

Thanks for stopping by and hope to have you visit regularly!

There are many, including me, who believe that there is no difference in owning a business and owning an investment. In both cases, you own a piece of the business (outright versus partial). Ultimately the wealth or the net worth is determined by the assets you own, regardless of how you own it and the business decisions you make while owning the assets.

The article was meant to point out precisely the difference between the two ownership structures and the effect it has on one’s net worth over a long period. If two people are given same amounts of money, the way they choose to invest it may have a great impact on the net worth they end up with.

The fact that Warren Buffet is the richest person on earth kind of ends all arguments about which investing method is better. Now of course, we are talking about different time horizons here, most of the hedge fund managers have been investing for shorter time than Buffett, so it is kinda difficult to say with conviction that some of them may or may not outperform Buffett over a long period. We can have a good discussion on this but may never know for sure

(As an aside, there are stocks that have performed better than Berkshire Hathaway over the last 18-20 years. Leucadia National comes to mind)

]]> By: Varun http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-173 Varun Tue, 29 Jul 2008 09:40:50 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-173 This analysis between Buffet and a Hedge Fund isnt quite upto the mark in the sense that its a comparison of the wealth of the owners, which have been managed differently... instead it should be a comparison between the 2 ways of investing, the way they've earned it, i.e. the Hedge Fund Way and the Buffet Way (aka Long Termism), it should be like, 2 people with the same amounts of money at a given date, applying the 2 methods and after about 5 years, where does that take you ? This analysis between Buffet and a Hedge Fund isnt quite upto the mark in the sense that its a comparison of the wealth of the owners, which have been managed differently… instead it should be a comparison between the 2 ways of investing, the way they’ve earned it, i.e. the Hedge Fund Way and the Buffet Way (aka Long Termism), it should be like, 2 people with the same amounts of money at a given date, applying the 2 methods and after about 5 years, where does that take you ?

]]> By: Richard http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-123 Richard Tue, 25 Mar 2008 19:53:53 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-123 Hey Arohan, I've been stopping by your page fairly often lately, thought I'd leave a comment. Was wondering if you'd like to do a blogroll exchange with me... I think you know my website: http://hedgeagainstspeculation.com Also, if you get a chance, you should enter into the contest I have on my website, best of luck to you. <em>Richard's last blog post..<a href='http://hedgeagainstspeculation.com/?p=53' rel="nofollow">BULLS vs. BEARS, MY PREDICTION</a></em> Hey Arohan, I’ve been stopping by your page fairly often lately, thought I’d leave a comment. Was wondering if you’d like to do a blogroll exchange with me…

I think you know my website: http://hedgeagainstspeculation.com

Also, if you get a chance, you should enter into the contest I have on my website, best of luck to you.

Richard’s last blog post..BULLS vs. BEARS, MY PREDICTION

]]> By: Arohan http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-122 Arohan Mon, 24 Mar 2008 00:22:16 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-122 @Options Strategery: Yes 'carried interest' is basically a hedgies equity in the fund. Politician would like to tax the fees as income (which I agree with) but the hedgies argue that it is actually capital gains (which it is for the fund; not for the hedgies though) and should be taxed at the lower 15% rate. Regardless of the rate, the every year the fees are taxed unlike in a situation where you are holding equity and let it grow where the taxes do not come into play until the time you cash out @Melo: No, you are not mistaken @Options Strategery: Yes ‘carried interest’ is basically a hedgies equity in the fund. Politician would like to tax the fees as income (which I agree with) but the hedgies argue that it is actually capital gains (which it is for the fund; not for the hedgies though) and should be taxed at the lower 15% rate. Regardless of the rate, the every year the fees are taxed unlike in a situation where you are holding equity and let it grow where the taxes do not come into play until the time you cash out

@Melo: No, you are not mistaken

]]> By: Melo http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-121 Melo Sun, 23 Mar 2008 20:00:15 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-121 If I'm not mistaken, isn't he the richest man on Earth? <em>Melo's last blog post..<a href='http://www.i-tong.com/2008/03/23/entreframe-a-second-look-at-entrecard-widgetsurf/' rel="nofollow">EntreFrame: A Second Look At Entrecard Widgetsurf</a></em> If I’m not mistaken, isn’t he the richest man on Earth?

Melo’s last blog post..EntreFrame: A Second Look At Entrecard Widgetsurf

]]> By: Options Strategery http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-119 Options Strategery Sun, 16 Mar 2008 07:29:00 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-119 I thought hedgies can do the same thing by putting their fees into the fund as 'Carried Interest'. Isn't that what the politicians are trying to tax now? <em>Options Strategery's last blog post..<a href='http://feeds.feedburner.com/~r/OptionsStrategery/~3/250612069/short-idea-true-religion-apparel-trlg.html' rel="nofollow">Short Idea: True Religion Apparel (TRLG)</a></em> I thought hedgies can do the same thing by putting their fees into the fund as ‘Carried Interest’. Isn’t that what the politicians are trying to tax now?

Options Strategery’s last blog post..Short Idea: True Religion Apparel (TRLG)

]]> By: Arohan http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-118 Arohan Sat, 15 Mar 2008 09:40:48 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-118 @Nick thanks for the honor! @Dan, thanks for the trackback on your response to my article. I will be posting a response to your response soon :-) @Inquisitor, I think this is the reason why someone like Edward Lampert would find it attractive to buy a long term stake in Sears/K-mart or why a Fortress or a Blackstone goes public. Otherwise in a hedge fund model, there is no equity building, just cash outs. @Nick thanks for the honor!

@Dan, thanks for the trackback on your response to my article. I will be posting a response to your response soon :-)

@Inquisitor, I think this is the reason why someone like Edward Lampert would find it attractive to buy a long term stake in Sears/K-mart or why a Fortress or a Blackstone goes public. Otherwise in a hedge fund model, there is no equity building, just cash outs.

]]> By: Inquisitor http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-117 Inquisitor Sat, 15 Mar 2008 05:53:41 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-117 Interesting perspective. It's interesting because most people say buyside guys make way more than the sellside because of leverage and the ability to invest rather than just earn fees, but this shows that even on the buyside, building equity rather than just taking the cash leads to more long-term wealth. <em>Inquisitor's last blog post..<a href='http://feeds.feedburner.com/~r/MergersAndInquisitions/~3/250096315/' rel="nofollow">Weekly Reader Q&A: Nonprofit To Private Equity, The Role Of Accounting Firms And Startup vs. Marketing Internship</a></em> Interesting perspective. It’s interesting because most people say buyside guys make way more than the sellside because of leverage and the ability to invest rather than just earn fees, but this shows that even on the buyside, building equity rather than just taking the cash leads to more long-term wealth.

Inquisitor’s last blog post..Weekly Reader Q&A: Nonprofit To Private Equity, The Role Of Accounting Firms And Startup vs. Marketing Internship

]]> By: The Curious Investor » Blog Archive » How to become the richest person in the world http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-116 The Curious Investor » Blog Archive » How to become the richest person in the world Sat, 15 Mar 2008 04:04:48 +0000 http://www.arohanvalue.com/2008/03/12/why-warren-buffet-is-richer-than-the-hedge-fund-managers-a-tale-of-two-business-models/#comment-116 [...] read a very interesting article on Arohan’s Investing Life this week. He compared Stephen Schwarzman and Warren Buffett in order to make the argument that the [...] […] read a very interesting article on Arohan’s Investing Life this week. He compared Stephen Schwarzman and Warren Buffett in order to make the argument that the […]

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