Tags: warren buffett | hedge fund | bet | charity

Buffett Wins Million-Dollar Bet Against Hedge Funds, Pledges Money to Charity

Buffett Wins Million-Dollar Bet Against Hedge Funds, Pledges Money to Charity
(AP)

By    |   Wednesday, 03 January 2018 11:22 AM

Warren Buffett won a $1 million bet against hedge funds, and a charity group that helps girls is the winner.

The famed billionaire chairman of Berkshire Hathaway in 2007 made a bet that an S&P 500 stock index fund would have greater gains than a basket of hedge funds over the course of a decade.

The index fund returned 7.1 percent compounded annually over the 10-year period, beating the 2.2 percent average return of a basket of funds picked by asset manager Protégé Partners, The Wall Street Journal reported.

The hedge-fund industry has suffered from poor performance, leading former star money managers to return money to investors and shut down. John Griffin, John Burbank, Eric Mindich, Neil Chriss, Hugh Hendry and Whitney Tilson are among the star investors who closed their funds last year.

Buffett said he would give the prize money to the Omaha, Nebraska, affiliate of Girls Inc., a non-profit organization that provides programs designed to inspire “all girls to be strong, smart and bold.” 

As it turns out, the nonprofit group will be getting more than the original $1 million wager, because a change in the bet included the purchase of Berkshire Hathaway B shares.

In the original bet, the two sides put about $320,000 into bonds that were expected to rise in value to $1 million dollars in 10 years. But the bonds gained more than expected as the Federal Reserve cut interest rates to record lows during the 2008 financial crisis.

Buffett and Protégé Partners agreed to fatten the pot in 2012 by buying Berkshire B shares as part of that bet. Those shares are now worth about $2.2 million.

"An investment in the girls' potential always pays off over time and, like Warren, we're in it for the long haul," Roberta Wihelm, executive director of Girls Inc. of Omaha, told USA Today. "We'll put the money to work helping girls grow up to become confident, self-sufficient women."

The organization plans to invest the donation and use the proceeds for transitional housing for 16 young women who are aging out of foster care.

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Warren Buffett won a $1 million bet against hedge funds, and a charity group that helps girls is the winner.The famed billionaire chairman of Berkshire Hathaway in 2007 made a bet that an S&P 500 stock index fund would have greater gains than a basket of hedge funds over...
warren buffett, hedge fund, bet, charity
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2018-22-03
Wednesday, 03 January 2018 11:22 AM
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