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Ted Seides reflects on his famous bet with Warren Buffett: that a portfolio of hedge funds would outperform the S&P 500 over 10 years. Buffett won decisively (S&P 500 returned 125% vs hedge funds' 36%). Seides shares the hard-won lessons about fees, indexing, and humility.
Canon
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Seides demonstrates the courage-is-learnable Canon by publicly analyzing his loss: rather than hiding from the bet's outcome, he wrote extensively about what went wrong, what he learned, and how it changed his investment philosophy.
Highlights
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The Buffett bet proved that after fees, most active managers underperform index funds — and the fee drag compounds devastatingly over long time horizons
Seides presents the numbers: the S&P 500 returned 125.8% over 10 years while the hedge fund portfolio returned 36%. The primary driver of underperformance wasn't bad stock picks — it was the 2-and-20 fee structure that consumed roughly half of the hedge funds' gross returns.