Buffett: I don’t understand quantitative trading

#2021 Berkshire Shareholders Meeting#

[Questioner:] What do you think of quants? Jim Simmons’ Medallion Fund has an annualized return of 39% after 30 years of fees, which proves that (quantitative investing) works. Would you consider hiring a quantitative trading assistant at Berkshire to work alongside Ted or Todd?

(run_rabbit_run: It is said that the annualized rate of return of the Medallion Fund is as high as 66% before the fee. It is said that the fund charges a 5% management fee and a 44% performance incentive. Please verify the accuracy of the information yourself~)

[Buffett:] Well, I would say no to the second question. Charlie to answer the first question.

[Munger:] Well, that’s interesting. Quant funds do a fantastic job of short-term trading. They found some algorithms that could increase short-term forecasting power. As long as they keep making money, they keep using these algorithms. But when they started using the same trading system, trying to find some algorithm to make long-term stock predictions mechanically, it didn’t work out well. And when it comes to short-term forecasting, they found that if they tried to trade too much, they would destroy their edge. So the money they can make is limited.

(run_rabbit_run: quantitative trading also has limitations)

[Buffett:] But they are very, very smart.

[Munger:] Yes, they became very rich.

[Buffett:] Well, very, very smart.

[Munger:] Very smart, very rich, yes. By the way, their performance is also very good.

[Buffett:] Yeah.

[Munger:] Jim Simmons.

[Buffett:] But we’re not going to make money trading stocks, and my answer is, we don’t know how (quant trading). If we knew how to make more money in stock trading, we might do stock trading too, but we don’t know how. Also, I wouldn’t feel comfortable asking anyone to do (which I don’t understand) stock trades for us. It’s that simple.

(run_rabbit_run: No matter how much money I make, I won’t do it, let alone find someone to help me do it)


【Key points】

1. The translation content and remarks contain more subjective components. Please check the accuracy by yourself. The objectivity of the information is not guaranteed. Do not use it as any investment basis or any other basis~
2, there are a few deletions.


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