Will a collection of hedge funds beat the S&P 500 over the next 10 years?  Warren Buffett doesn’t think so.  And he’s willing to bet on it, to the tune of a million bucks.

Buffett put his own cash on the line (not that he’s got a shortage of it) up against Protege Partners LLC, a New York-based investment firm that manages baskets of hedge funds (also known as ‘funds of funds’).  Both parties ponied up $320,000 each and invested the total in a zero-coupon Treasury bond that will be worth $1 million in 10 years time.  The proceeds will go to the winner’s charity of choice.

Buffett is confident that he’s got the upper hand, thanks to the hefty fees that hedge funds charge – especially those that invest in other funds, where there’s multiple layers of fees.  Many hedge funds charge a “2 and 20” fee, which means they take 2% of the fund’s assets per year as a management fee, plus 20% of any profits as a performance fee.  Buffett has been a longtime critic of high investment fees and is putting his money where his mouth is in this case.

Will fees be the deciding factor in the wager?  We’ll know in 2017.

Betting against Warren...hmmm...not a very fruitful exercise the last time I checked.