One of the greatest investors in history is warning that hedge funds are no silver bullet.

Warren Buffett, at a press conference following the annual meeting of his Berkshire Hathaway in Omaha, Neb., cautioned that investing in hedge funds is no way to guarantee strong returns, because their returns are misleading.

“The gross performance may be reasonably decent, but the fees will eat up a significant percentage of the returns,” he said. “You’ll pay lots of fees to people who do well, and lots of fees to people who do not do so well.”

Buffett noted that Fidelity Investments’ Magellan fund, once the largest mutual fund in the world and one of the best performing, fell on hard times when it got too big. Some have blamed the mediocre hedge fund returns of the past several years on too much money chasing a limited number of opportunities.

“If you take something like Fidelity Magellan, which Peter Lynch ran terrifically, a lot of the results were achieved with smaller amounts,” he said.

What should investors do? Buffett went to bat for index funds.

“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,” he said.