Aaron Brown, Columnist

Buffett's Hedge-Fund Bet Was a Virtual Sure Thing

The Sage of Omaha's willingness to back index funds probably saved many investors from costly errors.

September 27, 2017 at 3:45 PM UTC

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

The winner.
Photographer: Spencer Platt/Getty Images

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

Ten years ago, Warren Buffett bet $500,000 that an S&P 500 index fund would beat the average of five fund-of-funds selected by the investment manager Ted Seides over the subsequent 10 years. The bet ends in December, but Seides has already conceded defeat.

People have been arguing for decades over whether active management produces superior post-fee returns. The answer depends on which active funds, over which time periods, using which evaluation criteria. Each side can cite high-quality studies and neither changes position. In bets, the parameters are set in advance, so fair-minded people accept the result.