Warren Buffet Wins $1M Hedge Fund Bet; Charity The Real Winner

OMAHA, NE — Once upon a time, billionaire Warren Buffet bet big that his index fund — over the course of 10 years — would beat a basket of hedge funds. Well, that was 10 years ago. And now the chickens are coming home to roost — for the hedge funds.

Buffett wagered $1 million that his S&P 500 index fund would top a basket of hedge funds over a period of a decade. The proceeds would go to a charity: Girls Inc. of Omaha, which provides after-school programs and summer programs for girls in elementary school through high school.

The Wall Street Journal reported that when the New York Stock Exchange closed on Friday, Dec. 29, Buffet, chairman of Berkshire Hathaway Inc., had won the bet — and it wasn't close.

Buffett’s index fund returned 7.1 percent compounded annually, the Journal reported. His rivals returned an average of just 2.2 percent.

Now, the charity for girls will probably receive more than the originally agreed upon $1 million, the Journal said. The $320,000 in bonds that originally made up the bet appreciated faster than expected as interest rates dropped.

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 [percent] since then.

After Friday, the last day of trading in 2017, those 11,200 shares are worth $2.22 million.

Girls Inc. of Omaha's yearly budget is around $2.8 million, Executive Director Roberta Wilhelm told the newspaper.

Click here to read the full article from The Wall Street Journal.

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