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Home>How Buffett won his $1 million hedge fund bet

How Buffett won his $1 million hedge fund bet

How Buffett won his $1 million hedge fund bet

09/28/2017

By Mitch Tuchman

The stock market can surprise investors who can't predict the future

Nearly 10 years ago, iconic billionaire investor Warren Buffett took what seemed like a contrarian bet for a professional stock picker.

He bet any comer that a simple, low-cost investment in the S&P 500 would beat a hedge fund strategy over 10 years. On the line was $1 million, to be paid to a charity of the winner's choice.

Buffett(BRKA) (BRKA) won that wager handily, ending the ninth year of the bet up 85.4% vs. 22% for a collection of five hedge funds. The hedge-fund manager who took him on has thrown in the towel, conceding that a passive investment in the stock market was unbeatable (http://www.rebalance-ira.com/news/index-funds-still-beat-active-portfolio-management/?utm_source=marketwatch&utm_medium=column&utm_campaign=buffett-hedge-bet-2017-09-28&utm_content=mt).

In annualized terms, Buffett's low-cost index fund investment grew by 7.1% a year, compared with 2.2% for the hedge funds.

The losing hedge-fund manager, a remarkably good sport named Ted Seides, later wrote a footnote on the loss in the form of an online column. Essentially, Seides wrote, Buffett's win was more about luck than skill.

Crystal ball

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