Ten years ago, Warren Buffett bet celebrated hedge fund manager Ted Seides of Protégé Partners that an investment in a low-cost S&P 500 index fund would outperform an investment in Seides's "fund-of-funds," a basked of five funds managed by his firm.
Over the ten years, the S&P 500 gained 7% per year, while Seides' funds returned 2.2% (less Seides's hefty management fees).
Buffett is fond of rubbishing managed funds and famously instructed his wife to keep all her wealth in index funds after Buffett's death.
That means Seides' $1 million hedge fund investments have only earned $220,000 in the same period that Buffett's low-fee investment gained $854,000.
"For all intents and purposes, the game is over. I lost," Seides wrote. The $1 million will go to a Buffett charity, Girls Inc. of Omaha.
Warren Buffett wins $1M bet made with hedgie a decade ago [Gregory Bresiger/NY Post]
(via Naked Capitalism_)
(Image: Overjive, CC-BY-SA)