Every year at this time we update the results of a friendly one million dollar wager made in 2008 by Warren Buffett. He took the modest S&P 500 index versus five hedge funds handpicked by prominent NY money manager Protégé Partners. It’s a ten-year bet. With just two years left on the clock, who’s looking good and who’s looking for the exit? Here’s the lowdown.
The Protégé picks pulled out a big win in 2015, thumping the S&P 500 with a 1.7 percent gain versus the index’s 1.4 percent return. Well, maybe that doesn’t really qualify as a big win, but after six straight years of falling short, it may have felt like one for Protégé.
The hedge funds “won” the first year of the wager, the disastrous year known as 2008, by falling only 24 percent versus a 37 percent loss by the S&P. That was followed by six straight Buffett wins, and now 2015’s near draw.
Although the hedge funds, in theory, have a much bigger toolbox for producing gains, including short selling, market timing and derivatives, the five funds have an average cumulative gain of only 22 percent for the eight-year period.
Buffett’s side (the bet utilizes Vanguard’s Admiral S&P 500 mutual fund), which does nothing but buy, hold and maintain valuations in line with the index, is up 66 percent, a three-to-one margin.
Two years to go
The Oracle of Omaha would be the first to remind us that it’s impossible to know what will happen over the next two years, but for those of us who believe in the power of indexing and the perils of active management, things look good.
As for Ted Seides, the Protégé exec who orchestrated the wager, he’s probably lost interest in the whole affair. The ultimate winner, by the way, will most likely be Girls, Inc. of Omaha, the charity selected by Mr. Buffett to receive the payout should he prevail.
See ya next year.
Max Osbon – email@example.com
- This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
- “Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
- Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
- Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
- This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
- While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
- Adviser does not endorse the statements, services or performance of any third-party vendor.
- Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.