Buffett’s snide remark on hedge funds: Lot of people have become rich by figuring how to get others put up capital

He highlighted the fact that if all the shareholders of Berkshire were paying just one percent as investment fee to the company, they would have paid a whopping $8 billion in fee for managing their money.

Taking a dig at the hedge fund industry, Warren Buffett said that investment management is a “very good” game and many have got rich just by figuring out how to make others put up capital for investing.

“Lot of people have gotten very rich in the country by essentially figuring out how to get others put up the capital. And that's what people do in the money management business. And they get very, very rich because they get an override on other people's capital,” said Buffett while speaking at the annual shareholders meet of Berkshire Hathaway.

He highlighted the fact that if all the shareholders of Berkshire were paying just one percent as investment fee to the company, they would have paid a whopping $8 billion in fee for managing their money.

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“Investment Management is a very good game, because other people put up the capital and you charge them for the capital whether they do well or not, and then charge them a lot more if they do well. I mean, it's a well-designed business for the people who practice it, and who can blame them. I mean that is capitalism,” said Buffett.

The veteran investor further said that he saw such activities during his time with Salomon Brothers and decided he didn’t want to see it more.

“Charlie and I decided it wasn't too well in the business after a while, but we weren't criticizing the efficacy of it. It just didn't appeal to us after a while,” said Buffett.

“The one difference that Charlie and I did from other people, we put all our own money into it, so we did share the losses and with our own capital,” he added.