[fgimenez]

I chatted with an affiliate of the counterparty to the bet here - a couple years before the bet ended but clearly when they were gonna lose. They did say two interesting things I'll relay here without necessarily agreeing:

1. Their major thinking is that the growth of index funds is driven by volume of new investors, not necessarily market performance. At some point we hit the diminishing returns of new money into indexes. When that happens we'll see their "guaranteed" growth slow and you'll need to turn to hedge funds for alpha. He thought 10 years was enough for this to play out. Obviously wrong on timing, but not necessarily wrong on outcome.

2. One of the conditions of the bet was that they have lunch once a year to discuss bet progress. Given that charity lunches with Warren are going for 4.5mm today, they essentially got 10 lunches for 100k each. That is...quite valuable for a hedge fund manager.

Now, nobody can sell a loss better than a hedge fund, so I take with a grain of salt. But it is some food for thought.

[pedrocr]

For 1) alpha is what you don't want when investing in index funds. Index funds can only stop working if they stop being able to track the market. That can happen if they're such a big part of the market that trading is effectively broken, but 10 years would definitely not be enough to reach that point.

[tybit]

On 1; Is there any data to suggest that inflows to index funds are pouring significantly more money into companies within an index than if people invested directly or with hedge funds?

[qeternity]

Absolutely. The ETF space has exploded enormously over the past decade as the Fed pumps trillions of dollars into risk assets.

Having spent most of my career as a hedge fund trader, I absolutely agree with Buffet. But I think a decade of the largest monetary interventions skew the numbers massively in favor of a long only passive investor.

[fgimenez]

I cannot comment on a full macro basis, but it is definitely true that being listed on an index such as S&P 500 will spike the market cap. TSLA was a recent example here. Matt Levine has an interesting piece on this (as usual) regarding trading on index inclusion as securities fraud: https://www.bloomberg.com/opinion/articles/2021-01-05/dystop...