Buffett Winning In S&P vs. Hedge Funds Bet

Jan 25 2013 | 1:18pm ET

Hedge funds may have lost more than some pride when they were trounced by the Standard & Poor's 500 Index last year. They may have lost their battle of the titans with Berkshire Hathaway's Warren Buffett.

The Oracle of Omaha made a 10-year bet five years ago, that money invested in an S&P index fund would outperform a fund of hedge funds. And at halftime, Buffett (and the S&P) is up by more than a touchdown.

Buffett's index fund is up 8.69% over the past five years. A suite of five funds of funds selected for the battle royale by Protégé Partners is up just 0.13% over the period.

Buffett benefitted handsomely from a nearly 16% surge by the S&P last year, the second year in a row that the index bested the average hedge fund. Protégé's fund of funds of funds, by contrast, rose only 6.46% during the year, in line with the average hedge fund's performance for 2012.

Of course, there's a long way to go. In the bet's first year, 2008, Buffett's Vanguard Admiral shares lost 37% against Protégé's 24% drop. Still, the results—the first time either side has been in the black—earned a "gulp" from Protégé's Ted Seides. It's also the first time that Buffett's been ahead as the S&P climbed out of a deeper hole than the hedge funds.


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...