Which is better, hedge funds or the S&P500?
According to Fortune Magazine, Thats the question being debated between Warren Buffett, CEO of Berkshire Hathaway, and Protege Partners, a NYC money management firm that runs funds of hedge funds.
These two have entered into a bet to see which one brings in the most return.
Protege has carefully picked 5 hedge funds in hopes that the averaged returns that those vehicles deliver net of all fees, costs, and expenses.
Buffett, who has long argued that the fees that such “helpers” as hedge funds and funds of funds command are onerous and to be avoided has bet that the returns from a low-cost S&P 500 index fund sold by Vanguard will beat the results delivered by the five funds that Protg has selected.
The bet apparently began 1 Jan 2008.
The bet lies between Buffett (not Berkshire) and Protg (the firm, not its funds). And there’s serious money at stake. Each side put up roughly $320,000. The total funds of about $640,000 were used to buy a zero-coupon Treasury bond that will be worth $1 million at the bet’s conclusion.
It is all in a good name as that $1 million will then go to charity. If Protg wins, it has asked that the money be given to Absolute Return for Kids (ARK), an international philanthropy based in London. If Buffett wins, the intended recipient is Girls Inc. of Omaha, whose board includes his daughter, Susan Buffett.