> Warren Buffett Blog: Warren Buffett just won a $1 million bet made 10 years ago

Monday, January 1, 2018

Warren Buffett just won a $1 million bet made 10 years ago

Nearly a decade ago, in the midst of the global financial crisis, Ted Seides, the former CIO of Protege Partners, placed a very public, million-dollar bet on behalf of his firm. His counterparty in that bet was none other than Warren Buffett. Seides wagered that over the course of the subsequent decade, a bespoke portfolio of 5 funds of funds, would outperform a low-cost Vanguard index fund selected by Mr. Buffett.

When he placed the bet a decade ago Buffett said he would hand over any proceeds from the victory to charity. The charity he chose was his local Girls Inc. affiliate, The Wall Street Journal reports. The charity provides after-school care as well as summer programs for girls ages 5 to 18.

Buffett officially “won” the wager last week, but said throughout 2017 that he was confident that he would win. Over the course of the bet the S&P 500 index fund returned 7.1% compounded annually, significantly more than the basket of funds selected by an asset manager at Protégé Partners. That basket only returned an average of 2.2%.

Both Buffett and Protégé Partners originally put around $320,000 into bonds for the bet that was expected to appreciate to $1 million over the course of the 10 years. The bonds ended up appreciating faster than either party expected, and in 2012 the duo decided to purchase Berkshire B shares, which are now worth $2.22 million.