Warren Buffett wins million-dollar bet against hedge funds

In 2008, Berkshire Hathaway Chairman Warren Buffett initiated a million-dollar bet to demonstrate the efficacy of passive investing. He challenged financial professionals to assemble a portfolio of at least five hedge funds that could outperform a low-cost S&P 500 index fund over a ten-year period.

Ted Seides, then a manager at Protégé Partners, accepted the challenge. While the hedge fund portfolio initially showed more resilience during the 2008 financial crisis—losing 23.9 percent compared to the S&P 500's 37 percent loss—the trend reversed in subsequent years.

By 2017, before the ten-year term concluded, Seides publicly conceded the bet, stating, “The bet is over. I lost.” The hedge fund selection averaged only a 2.2 percent annual return, while the index fund outperformed significantly. The winnings from the bet were directed to a charitable organization.