The fixed investment mandates of mutual funds and the pressures put on portfolio managers to deliver short-term gains take a head-turning toll on gains. Just take a look at the 20% annualized gains of Berkshire Hathaway over its 45 years of existence.
As Jonathan Rahbar, a mutual fund analyst at Morningstar, told The Journal of Warren Buffett's seemingly uncanny investment prowess: "Throughout his tenure, he's been a huge proponent of investors thinking about themselves as owners of companies rather than investors [which fits his] extremely long-term approach. Mutual fund managers have incentive to do well on a year-in year-out basis. If things don't go well for a year or two, they'll see outflows."
Timothy Vick, a senior portfolio manager at Sanibel Captiva Trust and author of the book "How to Pick Stocks Like Warren Buffett," added: "Mutual funds have to sell to institutions who lump them into style boxes and expect them to be fully invested."