After being seven years into a 10 year wager based on performance, Warren Buffett, Berkshire Hathaway’s CEO, is winning the bet hands-down.
The results are finally in for the seventh year of what many are calling The Million-Dollar Bet. Warren Buffett made a 10 year wager which, stated that the S&P 500 would outperform a sampling of various hedge funds. And for the time being at least, it looks like the Berkshire Hathaway CEO is going to destroy the competition.
Based on the terms of this wager, Warren Buffett is betting with his own money on how well an S&P 500 index fund on the stock market performs. New York money manager Protégé Partners is betting that five hedge funds – the names of these funds were never disclosed publicly – that were picked by Protégé carefully at the beginning of this wager. Over the last seven years, the Vanguard’s 500 index fund Admiral shares are up 63.5%. That’s what Warren Buffett chose as his vehicle for this bet. At this time, the five hedge funds chosen by Protégé Partners, on average, are up by an estimated 19.6%. This estimation comes because not all five of the hedge funds have their final figures for 2014.
The winner has chosen a charity that will receive $1 million – or more based on the terms of the bet – once the wager is completed.
For the sixth year in a row this wager has gone in Buffett’s favor. In 2014, the Admiral shares were up by 13.6%. On the other hand, the average for the hedge funds was only 5.6%. The hedge funds only beat the S&P 500 index fund during the first year of the bet, back in 2008, which as we know was terrible for the stock market and the economy. The hedge funds only lost 24% that year, while the Admiral shares were down 37%.