Money and Finance
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Money and Finance
Buffett pulls ahead in wager against hedge funds
Found via the Corner of Berkshire & Fairfax.
It's halfway time in the 10-year stock market wager sometimes called The Million-Dollar Bet—that's Warren Buffett backing the performance of an S&P index fund vs. a New York money manager backing five funds of hedge funds—and there's double-barreled news.
Item One: For the first time since the bet started five years ago, Buffett has moved ahead—by an okay margin to boot. Item Two: For the first time ever as well, both sides have crawled out of the ditch (though the funds of funds barely made it) and are showing positive results.
…
At the five-year mark, the Vanguard index fund backed by Buffett is up by 8.69%. The five funds of funds picked by Protégé Partners to carry its flag in the race are up, on the average, only—"gulp," says Protégé partner Ted Seides—0.13%.
…
We'll let that suspense hang and report still one more piece of news about this bet. This bulletin concerns the 10-year zero-coupon bond that the two bettors, Buffett and Protégé, bought with the collateral they put up as the bet began. Each contributed about $320,000, so a total of roughly $640,000 went into the bond. Its value was set to rise gradually to $1 million—thus the nickname for the bet—by its conclusion on December 31, 2017.
But as Fortune.com reported last year (Buffett gains ground in hedge fund bet), the zero-coupon bond proceeded to perform so splendidly in the prevailing environment of falling interest rates that by 2012 it was already worth almost $1 million.
That remarkable result suggested to Buffett and Protégé that they could revise the terms of the bet and quite possibly get more than $1 million to the charity ultimately benefitting from the bet. That will be Girls Inc. of Omaha if Buffett wins and Absolute Returns for Kids if the victor is Protégé.
So the zero-coupon bond was sold for nearly $1 million toward the close of 2012, and by agreement between Buffett and Protégé, the proceeds were put into the B stock of Buffett's company, Berkshire Hathaway (BRKA). Berkshire's shares have risen since, and the current value of the investment is well over $1 million.
And couldn't the stock fall? It certainly could, but that won't make a whit of difference to the winning charity—because Buffett has guaranteed that it will get at least $1 million at the end of the bet. On the upside, meanwhile, there's no ceiling on what the charity can walk away with. That depends simply on what happens to Berkshire's stock between now and the bet's conclusion.
- Warren Buffett On Cnbc As Berkshire Agrees To Buy Van Tuyl Group
Links to videos: Berkshire to buy Van Tuyl Group: Buffett It only takes one conversation with Buffett... Outlook on car sales promising Allianz CEO steps down Buffett buying stocks and businesses Coca-Cola's new pay plan makes great sense: Buffett...
- The Wit And Wisdom Of Warren Buffett – By Carol J. Loomis
Fortune met Warren Buffett by accident in 1966. I was writing an investing article about another man, Alfred Winslow Jones, who wasn't famous at that moment, but was about to be because of the article. Jones was running something called a hedge fund,...
- Buffett Seizes Lead In Bet Against Protege (video)
March 21 (Bloomberg) -- Warren Buffett made a friendly bet four years ago that funds that invest in hedge funds for their clients couldn’t beat the stock market over a decade. So far he’s winning. The wager that began on Jan. 1, 2008, pits Buffett...
- Ready To Try On Mr. Buffett's Shoes
Found via the Corner of Berkshire & Fairfax.It is tough to follow a legend. Ted Weschler considers himself one of Warren Buffett's biggest admirers, but until this past summer, he couldn't actually see himself working for the Oracle of Omaha....
- Buffett Buys Reinsurer; Bond Venture Rumored
The Oracle of Omaha is picking up a Dutch reinsurance business on the cheap.-Dutch financial services firm ING on Friday announced the sale of its NRG reinsurance unit to billionaire investor Warren Buffet's Berkshire Hathaway for 300 million euros...