Immigration, Obamacare, gun control, minimum wage. There’s many issues where Hillary Clinton and Donald Trump split along party lines. However, there’s one point where Clinton prefers to remain more conservative and Trump swings more liberal: investing.
Clinton opts for safer index funds, while Trump goes for higher risk but potentially higher reward with hedge funds, reported Bloomberg. Clinton’s top holding is the low-cost Vanguard 500 Index Fund, a more conservative investing strategy trumpeted by the likes of value investor Warren Buffett. Trump, on the other hand, has his biggest investment in BlackRock’s Obsidian hedge fund.
Recently, Clinton’s preference has provided the higher payoff. Over the last three years, the Vanguard fund has returned an annual average of about 15% versus Obsidian’s approximately 5% annual average return. However, over the longer term, Trump wins out. The Obsidian fund returned about 11% on average each year over the past 10 years compared to about 7% annual average for the Vanguard fund. The returns take into account the fees.
Hillary and Bill Clinton have invested only in the Vanguard fund with the rest of their wealth held in cash and insurance policies, according to their recent May financial disclosures. The fund charges a 0.05% fee.
Trump has his wealth held across a range of financial products. The biggest amount, about $25 million to $50 million, is in BlackRock’s Obsidian Fund, which charges a 1% management fee and also takes 20% of profits. He also has has significant sums invested in three hedge funds run by Paulson & Co. And multiple 11 funds run by Baron Capital Management, reported Bloomberg.
Hedge funds have been falling out of favor with investors recently given their high fees and mediocre performance. So far, investors have pulled out $15 billion from hedge funds in the first quarter alone, the highest level of outflows since early 2009. That was likely triggered by the 0.67% loss hedge funds faced in the first three months of 2016. Hedge funds returns fell 1.12% last year.
Meanwhile, investing titans like Buffett have championed index funds like the Vanguard 500 over hedge funds. At the recent Berkshire Hathaway annual meeting, he reiterated the view that hedge funds are bad for investors but good for Wall Street.
“There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” said Buffett.