In the investment world, the debate over the merits of active vs. passive management styles just got a little more raucous. Taking the side of passive, buy-and-hold investors everywhere, Warren Buffett has made a gentlemanly wager with hedge fund firm Protege Partners that the firm couldn’t beat the S&P 500 over the next 10 years.  After reading various media interpretations of the wager and comments from readers, the website All About Alpha has provided an extended analysis of the wager between Buffett and Protege Partners, weighing in on seven key points -- including the fact that Buffett may actually be more of an "active" manager than he would like to admit.

So what are Buffett’s odds of winning the wager?  As All About Alpha suggests, they’re actually pretty good:

"Over the past 18 years, the HFRI Fund of Funds index has basically kept pace with the S&P 500 (HFRI is after-fees, S&P 500 is total return but before any (minimal) passive management fees). The 10 year rolling annualized returns (using a geometric average) show that with reinvested dividends, the S&P 500 usually does a little better than the HFRI fund of funds index - although both are on their way down. The result is that the S&P 500 actually beat the HFRI on a 10-year basis in 86% of months since January 2000 (the first month when the HFI benchmark had a 10 year history). So if Protege logs average performance for a fund of funds and both benchmarks perform in a similar manner of the next 10 years as they have in the past 18, then Buffett may emerge the winner."

Although the outcome may not actually prove the merits of either side, it will certainly be interesting to track the performance of Protege over time. After all, there's serious money at stake -- both Buffett and Protege have each put up $320,000.

[image: Warren Buffett] 

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"Serious Money"? $320,000??? Buffet? Joke? Good one? Not even...

In 10 years a lot might change, someone might just die

1.Buffet

2. Protégé

3. Most likely - $1,000,000 ( will cost nice $200,000 in today's money)

Very cheap price for advertising, not even mentionning that  Berkshire Hathaway

S&P before commodities bubble took off 2 years ago...oh my, Buffet is ONE FUNNY GUY, who really gives about him among TK customers...

Forgot to mention that all the money is going to charity. They used the money to buy a 10 year T-bill (think thats it) the article I was reading said it'll be roughly 1 mil going to charity.

I wonder if they're specifying risk-adjusted return.  Because if I was the hedgie, I could simply lever the heck out of a SPY purchase.  That way, any positive return on the index would win me the bet, even though I'm not actually creating any sort of alpha...

    I don't see anything passive about Buffet. The huge amounts of money he manages can't be managed like a $10,000 portfolio. The guy is dinamite.