Warren Buffett's $1 million bet against the hedge fund industry ended on December 31, 2017. His bargain-priced index fund tracking the S&P 500 finished up 125.8% over ten years — roughly 8.5% a year — against 2.8% to 87.7% for the five funds of funds picked by Protégé Partners. A new Motley Fool analysis on Nasdaq asks what happened next. With dividends reinvested, the same kind of fund has now grown to more than three times its size since the bet ended. It turned $10,000 at the December 29, 2017 close into about $33,300, a gain of roughly 233% — close to 15% annualized. MarketRadar's snapshot math puts the price-only gain at 185.2%, with the index closing Friday at 7,624 against 2,673.61 at the end of 2017.
The punchline is not that the index got better. It is that the bet started with a crash.
How the bet played out
Buffett issued the challenge in 2007: a plain S&P 500 index fund, bought and left alone, would beat any group of hedge funds a professional cared to pick over ten years. Only Ted Seides, co-manager of New York firm Protégé Partners, took him up on it, and the wager was set on December 19, 2007. Each side put up about $318,250 in zero-coupon Treasury bonds meant to be worth $500,000 at the end of 2017. The combined $1 million went to the winner's charity. Buffett picked the Vanguard 500 Index Fund; Protégé picked five funds of funds holding stakes in more than 200 hedge funds, whose names were never disclosed. In 2012, with bond yields below 1%, the two sides sold the bonds for 11,200 Berkshire Hathaway B shares — a switch that grew the pot to the $2,222,279 Girls Inc. of Omaha received in early 2018.
The hedge funds started well. In 2008, the index fund fell 37% while every one of the five funds of funds lost less — the only lead the active side would ever hold. Then, in Buffett's phrase from his 2017 shareholder letter, "the roof fell in": the five baskets trailed the index fund in every one of the following nine years. Seides conceded during 2017, writing that for all intents and purposes the game was over and he had lost. Through the end of 2016 the scoreboard already read more than 85% for the index fund against an average of 22% for the five baskets, the best of them at 62.8%.
The final tally shows how wide the gap became. The five funds of funds returned 21.7%, 42.3%, 87.7%, 2.8% and 27.0% — an average of about 36.3% — against 125.8% for the index fund. The best compounded at about 6.5% a year versus 8.5% for the index fund; the other four managed 3.6% a year or less. Buffett's explanation was fees, not talent: funds-of-funds investors faced yearly fixed charges of roughly 2.5% of assets, plus a cut of any profits, on top of each underlying hedge fund's own fees. "Performance comes, performance goes," Buffett wrote. "Fees never falter."
What the index has done since
MarketRadar's snapshot puts the S&P 500 at 7,624 at Friday's close, down 0.52% on the session and up 11.4% since the end of 2025. Against the 2,673.61 close on December 29, 2017, that is a price-only gain of 185.2% — 2.85 times — or about 12.6% a year across nearly nine years. The year-by-year closes below, from YCharts' annual series, show a path with two losing years and a pandemic crash in between.
| Year-end | S&P 500 close | Year change | Since end-2017 |
|---|---|---|---|
| 2017 | 2,673.61 | — | — |
| 2018 | 2,506.85 | -6.2% | -6.2% |
| 2019 | 3,230.78 | +28.9% | +20.8% |
| 2020 | 3,756.07 | +16.3% | +40.5% |
| 2021 | 4,766.18 | +26.9% | +78.3% |
| 2022 | 3,839.50 | -19.4% | +43.6% |
| 2023 | 4,769.83 | +24.2% | +78.4% |
| 2024 | 5,881.63 | +23.3% | +120.0% |
| 2025 | 6,845.50 | +16.4% | +156.0% |
| Oct 23, 2026 close | 7,624 | +11.4% YTD | +185.2% |
The table uses price closes only, so its yearly figures run slightly below the article's total-return numbers. The article's best year, 2019, reads 31% with dividends, and its 2022 loss about 18%. The rough patches were real either way. 2018 and 2022 were the fund's only losing calendar years since the bet. In spring 2020 it dropped roughly 34% from February 19 to March 23 before recovering. Six of the eight complete calendar years after the bet gained more than 17% on a total-return basis.
In cash terms, MarketRadar's math turns $10,000 invested at the end-2017 close into about $28,520 on price alone at Friday's 7,624; with dividends, the article's Vanguard ETF stand-in turns the same $10,000 into roughly $33,300. Stretch the window to the start of the bet and $10,000 at the beginning of 2008 is worth around $75,000 today, about 11% a year across close to two decades, a stretch holding two crashes and two more losing years.
Why it matters
Strip out 2008 and the bet's other nine years compounded at around 15% a year — essentially the same pace as the post-bet years. That is the article's central point: the index did not suddenly improve after 2017, the bet's decade simply opened with a financial crisis. Buffett himself noted that experts polled in late 2007 would probably have guessed something near the 8.5% the index actually delivered, crisis included. For anyone judging active managers against an index, the starting date can matter as much as the skill on either side.
The fee lesson has held up just as well. Hedge funds typically charged 2% of assets plus 20% of profits, and the funds of funds added roughly another 1% on top — a structure that takes its cut in good years and bad ones alike. Against that drag, a basket of the industry's best-paid stock pickers averaged 36.3% across a decade in which a fund anyone could buy returned 125.8%.
There is also a live market angle. The index closed Friday at 7,624, down 0.52%, with the Dow down 1.23% in the same session, and this week brings both the Federal Reserve's October 27-28 meeting and a heavy run of Big Tech earnings — the combination driving the market's recent swings, covered in our Fed meeting and earnings week preview and Friday's selloff report. The bet's history is a reminder that even a winning long-term holding spends long stretches falling: the post-2017 run alone contains a 34% crash and a 19% down year.
What to watch
- The Fed's October 27-28 meeting and Big Tech earnings, which will set the tone for the week after Friday's 0.52% S&P 500 drop.
- Whether Friday's selling extends: strategists cited by CNBC flagged roughly 7,500 as a deeper-decline trigger, after the September 16 intraday low of 7,507.77.
- The top of the range: the 52-week high of 7,852.60 leaves Friday's 7,624 between that ceiling and the watched 7,500 area.
- The pace question: the article's author would still favour an S&P 500 tracker for long-term money, but would plan on returns nearer the bet-era 8.5% yearly pace than the near-15% pace since it ended.
MarketRadar take
Nothing in the post-2017 run contradicts the bet's verdict. It extends it. The same low-cost index holding that beat five professionally chosen fund portfolios across a decade then delivered a larger gain in under nine years. It absorbed a pandemic crash, a 19% down year and Friday's 0.52% slide along the way. That record argues for patience over stock-picking as a default. But Friday's close at 7,624 sits between the watched 7,500 area and the 7,852.60 52-week high. That argues against extrapolating the post-2017 pace. The article's own planning assumption — something nearer the bet-era 8.5% yearly pace — looks like the honest one. The bet's real lesson was never that markets only rise. It was that costs compound against you, and time, left alone, has usually done the rest.
