Capital Group’s CEO Challenges Warren Buffet

Timothy Armour is the Chief Executive Officer of Capital Group, home to American funds and one of the biggest fund managers in the world. Timothy Armour recently challenged an assertion made by Warren Buffet—something Buffet believes in so deeply that he bet 1 million dollars on it.

Buffet recently wagered one million dollars on the premise that passive index funds are the best investments for retirement plans. He believes that inventing in an S&P 500 fund would make more money than if he places funds with hedge fund managers. The one million at stake would go to charity should Buffet win the wager.

Armour concedes that Buffet may win this bet, as some hedge funds turn out to be costly for investors. However, Armour believes that the issue is not about whether passive index funds are better than active ones—but about what investors receive in the long term. He also doesn’t believe that passive index funds are the safest place to put mutual retirement funds.

Although there are actively managed funds that have shown poor returns—there are others that have done the opposite. For example, an investor who placed $10,000 forty years ago in the S&P index fund would have returns of more than half a million dollars today. However, if that same investor had placed his investment in high-performing funds, he would have made even more than half a million dollars on his original investment. Armour believes that the key is finding fund managers who do their due diligence.

Named CEO of Capital Group on July 28, 2015, Mr. Armour graduated from Middlebury College with a degree in Economics and has more than 30 years experience in the finance industry. Recently, he played a key role in developing the partnership between Samsung Asset Management and Capital Group.