The hedge fund investor who lost a $1 million bet with Warren Buffett doubts he would make the same wager today

Warren Buffett.

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  • Ted Seides made a $1 million, decade-long bet with Warren Buffett that he lost in 2017.
  • The investor wagered that hedge funds would outperform a S&P 500 index fund.
  • Seides probably wouldn't make the same bet today as the odds of winning are lower.
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Ted Seides famously lost a $1 million bet with Warren Buffett that a basket of hedge funds would outperform the S&P 500 index over the course of a decade. The former hedge fund investor doubts he would place the same wager now.

"I probably wouldn't today for the next 10 years, not because I necessarily think it's a losing bet, as much as I don't think the odds are as tilted in favor of hedge funds as they were at the beginning of 2008," Seides said in a recent RealVision interview.

"You make a bet like that in public with a guy like Warren, I think it's incumbent on you to think that your odds are awfully good to win," he continued. "My guess is it's probably a 50/50 bet today, so I wouldn't do it as a 50/50 bet."

Seides, who hosts "The Capital Allocators Podcast," previously invested in hedge funds at Protégé Partners, a so-called fund of funds. For his bet with Buffett, he selected and tracked the performance of five funds invested in more than 100 hedge funds in total, while the Berkshire Hathaway chief backed the Vanguard S&P 500 index fund. They agreed the winner would be whoever posted the higher return net of fees, costs, and expenses.

Read more: Warren Buffett is hoarding $80 billion of cash, cleaning up his stock portfolio, and declining to bash bitcoin. Veteran investor Thomas Russo says why that strategy will ultimately pay off.

Buffett proposed the bet because he wanted to underscore the value of owning an index fund for passive investors, and highlight the hefty fees that hedge funds charge. He emerged the victor and donated his $2.2 million of winnings to charity.

Seides told RealVision that his wager with Buffett compared apples to oranges, and it would have been fairer to adjust their returns for market exposure, geographical focus, tax rates, and other differences. However, he acknowledged that complicating the bet "takes all the fun out of it."

The podcast host also bemoaned that his dad, a doctor and neophyte investor who he described as a "hoarder," missed out on buying a piece of Buffett's company over 60 years ago.

"He loves owning things and does not like selling them," Seides said, pointing to his dad purchasing IBM stock in 1959 and still holding it today. "It is a shame he didn't come across Berkshire Hathaway back then, because it would be worth a lot more."

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