Monday, June 9, 2008

Warren Buffett’s Hedge Fund Wager

From Fortune:

Buffett's big bet
The celebrated investor wagers a tidy sum that even carefully chosen hedge funds won't return more than the market over time.
Will a collection of hedge funds, carefully selected by experts, return more to investors over the next 10 years than the S&P 500?

That question is now the subject of a bet between Warren Buffett, the CEO of Berkshire Hathaway, and Protégé Partners LLC, a New York City money management firm that runs funds of hedge funds - in other words, a firm whose existence rests on its ability to put its clients' money into the best hedge funds and keep it out of the underperformers.

You can guess which party is taking which side.

Protégé has placed its bet on five funds of hedge funds - specifically, the averaged returns that those vehicles deliver net of all fees, costs, and expenses.

On the other side, 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 Protégé has selected....MUCH MORE

HT: DealBook who snipped this quote:

...Ted Seides, a principal of Protege, told
“”Fortunately for us, we’re betting against the S&P’s performance, not Buffett’s.”