Warren Buffett’s biggest investment tip: Be wary of fees.

At the annual meeting of his Berkshire Hathaway Inc., the billionaire warned about the enduring risk of derivatives, defended stocks in his portfolio and signaled that some of the company’s biggest subsidiaries are hitting speed bumps. But he saved a prime portion of the weekend event to argue again why investors would be better off ditching expensive money managers and consultants.

After telling shareholders that he would offer “probably the most important investment lesson in the world,” he said Wall Street salesmanship has masked poor returns for years. Consultants, he added, have steered pension funds and others to high-fee managers who, as a group, underperform what you could get “sitting on your rear end” in index funds. The arrangements “eat up capital like crazy,” he said.

Buffett was building on an argument he’s been making for years about why backing U.S. businesses in aggregate, through low-cost funds, is the more certain way to prosper over the long haul. To make his point, he made a bet that a Vanguard Group Inc. fund that tracks the S&P 500 Index could beat a basket of hedge funds from 2008 through 2017. Proceeds will go to charity.

On Saturday, he gave an update: The bundle of hedge funds picked by Protege Partners had returned 21.9 percent in the eight years through 2015. The S&P 500 index fund had soared 65.7 percent.

The chart showing results from the wager was “poignant” for the crowd that gathered Saturday in Omaha, Nebraska, said David Rolfe, who oversees $8.5 billion including Berkshire shares at Wedgewood Partners Inc. Buffett was “pounding the table pretty hard,” said Rolfe. “There’s a lot of high-profile money managers in this audience, and most of them are probably not earning their fees.”

Compounding the problem are middlemen who charge fees to pick managers, Buffett told shareholders.

“Supposedly sophisticated people, generally richer people, hire consultants. And no consultant in the world is going to tell you, ‘Just buy an S&P index fund and sit for the next 50 years,’" he said. “You don’t get to be a consultant that way, and you certainly don’t get an annual fee that way.”

Destined to Lose

That’s the key to the argument, said Richard Cook, a fund manager in Birmingham, Alabama, who made the trip to Omaha. Buffett still believes that some active investors can beat the S&P 500 over time, Cook said, but in a fund of funds “the fees on fees just destine you to lose.” Protege Chief Executive Officer Jeffrey Tarrant didn’t immediately respond to a message seeking comment.

In many ways, Buffett forecast a trend with his bet. Investing in indexes and exchange-traded funds has accelerated since the 2008 financial crisis. By comparison, poor performance by hedge funds as a group has led investors to pull money recently.

Hedge funds, on average, lost 0.6 percent this year through March 31, according to data compiled by Bloomberg. Last year, 979 funds closed, more than any year since 2009, and the industry saw outflows of $16.6 billion in the last two quarters, according to Hedge Fund Research.

Profit Gain

While Buffett ran hedge-fund-like partnerships in the 1950s and 1960s, he ultimately made Berkshire his investment vehicle and remains its largest shareholder. His acquisitions transformed the company into a conglomerate with dozens of subsidiaries and interests in manufacturing, retail, transportation and energy, primarily in the U.S. Berkshire Class B shares advanced 76 cents to $146.24 at 10:06 a.m. in New York, extending their gain for the year to 11 percent.

Buffett reiterated his view Saturday that businesses will do well in the U.S. in the coming decades. First-quarter profit at Berkshire climbed 8.2 percent to $5.59 billion on gains in the manufacturing segment and from investments, he told shareholders.

Still, some of the company’s largest units are facing challenges. The reinsurance business, long an engine of growth, has become less attractive amid increased competition and low bond yields. Earnings at Berkshire’s BNSF railroad were “down significantly” and will remain pressured because of slumping coal volumes, Buffett said. Insurance units were hurt by claims from hail storms.

Coke, Broccoli

Buffett and Vice Chairman Charles Munger acknowledged that two of Berkshire’s largest stock holdings, American Express Co. and International Business Machines Corp., are facing competitive threats. Buffett, 85, also defended Berkshire’s holding of Coca-Cola Co., despite obesity rates in the U.S.

“I have not seen evidence that convinces me that it’ll be more likely I reach 100 if I suddenly switched to water and broccoli,” he said. The remark sidestepped a request to discuss the effect of sugary drinks on global public health without touching on his own diet.

While Buffett highlighted Berkshire’s holding of Wells Fargo & Co., he said he would probably avoid investing in 45 out of the 50 largest banks, citing hidden risks tied to the use of derivatives.

Time Bomb

“It’s still a potential time bomb in the system,” Buffett said of the contracts, adding that a disruption in markets, potentially from a cyber attack, could make it hard for the largest lenders to value their holdings. “Anything where discontinuities can exist can be real poison in markets.”

He and Munger also criticized Valeant Pharmaceuticals International Inc. The drugmaker overhauled management last month and agreed to lower the price of certain drugs after being faulted by lawmakers for charging too much.

Buffett, who endorsed Democrat Hillary Clinton for president at an Omaha rally last year, opted not to talk much about politics at the meeting, even when he was asked about Republican Donald Trump. But he assured shareholders that Berkshire will do just fine, if either wins in November.

The U.S., Buffett said, is a “remarkably attractive place in which to conduct a business.”