Evaluating Managed Funds

[buffett]

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by the time you have enough years of data to see they are truly skilled and not just lucky, they'll be retired. And if you are trying to find those managers before they have all of the necessary data, you could be wrong and underperorm the benchmark.

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I respectfully disagree. I think it's possible to find good managers early on in their careers, the way Whitney Tilson describes, and I think Ed has done a good job in identifying Fairholme. Lowenstein/Goldfarb have their list of 10, and some of those are plenty young enough to be around for a good while.

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is there still positive alpha after evaluating on the 3-factor model?

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I honestly don't know what you're asking. Could you simplify this for those who may be playing along at home?

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Didn't W. Buffett say that most investors would be better off in index funds during a shareholder letter in the 90s?

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Yes (though I think it was done verbally at an annual meeting or two), and he's absolutely right. I recommend most of my friends and family (that don't have enough assets to hire me) to just go with Vanguard stuff. For the enterprising ones who have a mild-but-not-rabid interest in investing, I suggest Fairholme as the best among many Superinvestor choices.