Warren Buffett challenged hedge fund managers’ investment decisions, by offering $1 million dollars to a charity, claiming that he would achieve better investment returns by investing in an S&P 500 passive index based on market capitalization. This challenge sparked the “active versus passive” strategy debate.
Buffet trumpets the “let it be” approach in tauting the S&P 500 passive index funds. While Tim Armour, Capital Group’s Chairman, and CEO as of July 28, 2015, argues that a $10,000 investment in the first S&P 500, forty years ago, would create less wealth than investing in stellar active fund’s firms such as American Funds and The Growth Fund of America. On the other hand, Armour agrees with Buffett, boldly stating that there exist many mediocre and expensive hedge funds which harm investors and that low-cost, long-term investments are the key to investment returns.
In 1983, Armour graduated from Middlebury College and was awarded a B.A. in economics. Armour’s first job, right out of College, was with Capital Group. He was accepted into their Associates Program, and his entire career has been with Capital Group.
Armour has formed strong opinions concerning those who manage hedge funds and lives by his philosophy that investors should find active managers that earn their keep. His philosophy has been bolstered by reality, in stating the obvious, that a passive index can not follow business trends. His approach to the market sell-off in late 2015, was not to panic. He was right when he predicted that the sell-off was only a correction. Click here to know more about Tim Armour.
Armour believes that the economic changes with the Trump presidency is “real” and will produce a faster economic growth of global markets, with rising interest rates and higher inflation. According to Armour, the best investment strategy is to find a fund manager that invests his or her money.