Warren Buffett bet that the S&P 500 would outperform a basket of hedge funds over 10 years.
The wager began in 2008 after Buffett argued that expensive, actively managed investments would struggle to beat a low-cost index fund after fees. Ted Seides of Protégé Partners accepted the challenge, selecting five funds of hedge funds to represent the hedge-fund industry. Buffett chose an S&P 500 index fund.
The contest ran from January 1, 2008, through December 31, 2017. The S&P 500 gained about 126%, while the five hedge-fund portfolios gained roughly 36% after fees and expenses. Buffett directed the eventual winnings to charity, with the prize benefiting the Girls Inc. of Omaha charity.
A common mix-up is confusing the S&P 500 with the Dow Jones Industrial Average or the NASDAQ-100. The S&P 500 tracks about 500 large U.S. companies and is weighted by market capitalization, making it a broad-market benchmark rather than a portfolio personally selected by Buffett.