Does The Buffett Bet (index fund vs hedge funds-of-funds) actually work?

MYTH

A famous idea that does not survive an honest test.

The claim

Five hand-picked hedge funds-of-funds will beat a plain S&P 500 index fund over 10 years — Protege Partners (vs Buffett)

What we did

Tested against Buy & hold SPY / honest reconstruction.

The result

Result: 2008-2017: Vanguard S&P 500 index +125.8% (~7.1%/yr) vs the 5 funds-of-funds avg ~+36% (~3.2%/yr)

2008-2017: Vanguard S&P 500 index +125.8% (~7.1%/yr) vs the 5 funds-of-funds avg ~+36% (~3.2%/yr)

Verdict

Buffett's $1M wager, settled. A no-effort index fund roughly TRIPLED the average of five expert-selected hedge funds-of-funds over a decade -- net of their double layer of fees (2-and-20 at the funds, plus another fee layer at the fund-of-funds). The cleanest single indictment of paying up for 'smart money.'

What the test did and did not do

net of real costs
tested out of sample
point-in-time data
checked for look-ahead

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

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Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.