New York (HedgeCo.net) – In the past few days, both Warren Buffett and Bill Gross have taken jabs at the hedge fund industry. Speaking at Fortune Magazine’s Most Powerful Women Summit on Tuesday, Buffett criticized the fee structure of hedge funds, arguing that managers don’t have to worry about their performance when they can collect their 2% management fee.
Bill Gross took his swing via Twitter shortly after Fortress Investment Group came out with the news that it was closing its macro fund. Gross’ Tweet stated, “Gross: Story of The Day – Deep out of the money hedge funds shut down if 20% of profits out of reach. Start over later with clean slate!”

While Mr. Buffett and Mr. Gross are two of the most well respected investors of this generation, they too can have their bad periods. For Buffett, he might be a little upset that Berkshire Hathaway’s stock is down over 12% on the year. For Gross, perhaps he forgets that the Pimco Total Return Fund he used to manage lost 2.72% during 2005 and 2006 collectively while the overall market gained over 21%.

Despite these down periods, they are still both held in high regard by the investment community. It just seemed like they were lashing out at the industry and forgetting that even when their funds were and are down, their employees still have to be paid and thus the reason for the management fees for both hedge funds and mutual funds.

Rick Pendergraft
Research Analyst
HedgeCoVest