Berkshire Hathaway chairman and CEO Warren Buffett (R) and his wife Astrid (Photo : REUTERS/Anthony Bolante)
American businessman and investor Warren Buffet seems to be winning a $1 million, 10-year bet with a United States hedge fund chief. The bet was made on the evening of the financial crisis of 2008 and was about which man's financial strategies would be more successful.
Buffet is ranked as the world's second wealthiest person, according to Yahoo. He is the founder of Berkshire Hathaway, an extremely successful investment house.
Buffet's wager was with Ted Seides, the president of Protégé Partners, which specializes in hedge funds. Hedge funds are investments that involve much money and high risk.
The wager was certainly interesting due to the extremely high figure. Also, Buffet's investment style is mostly slow and steady, while Seides' method is more complex and high-risk.
Buffet selected Admiral shares from the S&P 500, the American stock market index. Seides, on the other hand, collected a group of five hedge funds that only invest in other hedge funds.
There are still three years left in the decade-long wager. However, Seides admitted on Feb. 11, Thursday, that Buffet is easily winning the bet.
Since 2008, shares of Admiral have increased about 63 percent. On the other hand, the returns from Seides' investments were only about 20 percent.
According to Seides, there are some key reasons for the unfavorable results. They include the zero interest policy of the Federal Reserve and the focus of investment managers on the S&P 500.
There is a slim chance that Seides could still win the bet. According to him, the market would have to shrink significantly.
To cover the bet, Buffet and Seides invested $640,000 into a bond that will be worth $1 million after a decade. They will donate the money to a charity, which according to Fortune, the winner will choose.
The bond, which is now worth $1.7 million, was sold. The proceeds were used to buy Berkshire Hathaway stock, with a guarantee that Buffet will pay the winning charity $1 million if the stock is not worth that much by the time the bet ends.
