In 2007, a 36-year-old Wall Street investment manager named Ted Seides took up a bet with the legendary investor Warren Buffett. The Oracle of Omaha, as Buffett is called, had claimed that “a fund that simply tracked the US stock market would beat any group of high-flying hedge fund managers”. Seides took objection to that. The pair agreed a million-dollar wager spanning ten years: Seides would put his money into five actively managed funds-of-funds, while Buffett’s cash went into a fund that simply tracked the S&P 500, an index of shares in 500 large US companies.
There is a reason Buffett is one of the world’s richest men: he is usually right. A decade later, he had achieved a 125.8 per cent return; Seides had managed just 36.3 per cent.
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