The real winner of Warren Buffett’s 10-year bet against hedge funds is Girls Inc. of Omaha.
Buffett bet $1 million in 2007 that an index fund would outperform a basket of hedge funds over a decade. The proceeds would go to charity, and Buffett designated his local Girls Inc. affiliate as the recipient if he won. When the closing bell rang at the New York Stock Exchange Friday, the famed investor locked in his victory.
Buffett, the chairman of Berkshire Hathaway Inc. BRK.A, -0.54% BRK.B, -0.67% has said throughout this year that he is confident he would win. From the start of the bet through the end of 2016, Mr. Buffett’s S&P 500 index fund SPX, -0.52% returned 7.1% compounded annually. The competing basket of funds of hedge funds selected by asset manager Protégé Partners returned an average of 2.2%.
And because of a twist in the bet’s history, Girls Inc. of Omaha is likely to get much more than $1 million.
Buffett and Protégé Partners originally put about $320,000 each into bonds that would appreciate to $1 million over the course of their wager. But the bonds appreciated much faster than expected as interest rates fell so the two sides agreed to go for a bigger prize. In late 2012, they agreed to buy 11,200 shares of Berkshire B shares, which cost $89.70 at the end of 2012. They’ve climbed 121% since then. After Friday, the last day of trading in 2017, those 11,200 shares are worth $2.22 million.
An expanded version of this report appears on WSJ.com
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