Ted Seides, Columnist

Why I Lost My Bet With Warren Buffett

The S&P 500 had a great run as hedge funds lagged. Odds are that history won't repeat.

May 3, 2017 at 12:00 PM UTC

Ted Seides is the managing partner for Hidden Brook Investments LLC. He formerly served as president and co-chief investment officer for Protege Partners LLC. He is the author of "So You Want to Start a Hedge Fund" and host of the Capital Allocators podcast.

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Nine years ago, Warren Buffett and I made a 10-year charitable wager that pitted the returns of five funds of hedge funds against a Standard & Poor’s 500 index fund. With eight months remaining, for all intents and purposes, the bet is over. I lost.

Warren discussed the bet in this year’s annual letter to Berkshire Hathaway Inc. shareholders, explaining that the high fees active money managers charge create a headwind relative to low-cost passive alternatives. He is correct that hedge-fund fees are high, and his reasoning is convincing. Fees matter in investing, no doubt about it.