To be an investor, you have to be something of a gambler, even if it’s mostly making safe bets. It seems that Berkshire Hathaway’s Warren Buffett is absolutely no exception to this rule. The billionaire philanthropist has been tracking an ongoing bet with Protege Partners, LLC. And, while the bet is well into its ninth year, the 2015 results are in, and the bet is far from over.
As you might expect, the bet is centered around stocks and investing. Originally started in 2007, the bet was first reported by Fortune in 2008. Set between Warren Buffett (using personal funds, not company money) and Protege Partners LLC (at the behest of its principal Ted Seides) this bet is set to last 10 years and reach an amount of $1 million. If Buffett wins, the money will be donated to Girls Incorporated of Omaha. If Protege wins, the money will be donated to Absolute Return for Kids, Inc.
The Original Bet
Posted through Long Bets, here is the original wording of the bet:
“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”
Basically, Buffett is betting that the stock market performance of a big index fund can beat out the averaged performances of five hedge funds. And, while the specifics of the bet have been kept partially private, it was reported that Warren Buffett chose the Vanguard 500 Index Fund Admiral Shares for his part of the best. Protege has kept its hedge funds secret, as part of the agreement, but many people have guessed that at least one of the five is a fund of funds run by Protege itself.
The stats for 2015 have finally been tallied up in the bet, and for the second time in the eight years the bet has been going on, Protege has pulled ahead. And, while things are looking good for Buffett with winning six out of eight years, a market contraction could easily put Protege in the lead with another two Decembers left. After all, it’s not the number of years that are won–it’s the actual performance. So it’s definitely not over yet.
And, while he is technically winning, in the first year of the bet, Buffett wasn’t as positive as normal. In fact, he only predicted a 60% chance that he would win while Protege boasted an 85% chance that its hedge funds would outperform. Either way, the money raised will go to a charity, so no matter which way the friendly wager goes, someone wins.