As a fun comparison, let's take Mr. Seides on his own, redefined terms in his latest post, and narrow our focus to what we know about the performance of his own fund, Protege Partners; specifically, let's revisit Warren Buffett's July 2008, 10-year bet that a simple Vanguard S&P 500 index fund would outperform a fund of funds chosen by Protege.
Some readers may already be familiar with the great FT Alphaville work in this space, but it's worth reading their summary of a terrific July 2014 Nomura Global Markets Research report (the FT post and summary takes you to a separate section where you can download the Nomura study itself -- well worth it. http://ftalphaville.ft.com/2014/08/01/1914342/the-hare-gets-rich-while-…)
Nomura brings us up to date on the long bet, and it has not been going well for Mr. Seides -- six years into the bet the Vanguard fund has outperformed Protege by a wide margin.
The reasons why are devastating not just for Protege, but the entire class of similar funds: both beta and correlation with standard asset classes are high; alpha is near zero (if not negative), and just to add insult to injury, there are those ridiculous costs and fees hedge funds charge compared to the de minimis Vanguard fees.
Perhaps the most damning part of the Nomura study is the exposure of the "secret sauce" that fund of funds claim to bring to the process in picking managers. As Nomura determines by unpacking the Protege fund performance (again, please look at the report and the detailed analysis): to achieve the basic model of alternative asset returns:
1) start with basic market exposure using the S&P 500 index or a rolling short VIX position,
2) reduce leverage to achieve an exposure of somewhere between 30% to 60% of standard, and
3) deduct fees.
The panoply of numbers and charts are there for all to review, and it's not pretty for Mr. Seides' case. As the late, great Pat Moynihan once said, everyone is entitled to his own opinion but not his own facts.
(In passing and if Mr. Seides would care to provide a very brief response or even just a link, I've searched for any comment, response, or analysis of how he thinks the bet is going and have found nothing; nor have I found anything by any third party taking his side. Mr. Seides probably thinks it best to keep silent -- hoping things turn before the bet ends -- but it would be nice to see any sort of response.)