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Jack Bogle: Here's why Buffett will win his $1 million bet against a hedge fund manager?By?Lawrence LewitinnApril 27, 2016 8:56 AMNot since the fictitious Duke Brothers of the movie Trading Places has a bet captured the imagination of investors like the one between Warren Buffett and hedge fund manager Ted Seides. But unlike the $1 wager between Mortimer and Randolph, Buffett and Seides have a lot more money at stake.Although he’s considered the greatest stock picker of all time and Berkshire Hathaway (BRK-A,BRK-B) is up 2,500% in the past quarter century alone, Buffett is betting on his belief that hedge funds can’t beat an index fund. And so far, Buffett is winning big.A little more than eight years ago, Seides accepted Buffett’s challenge and picked a group of five hedge funds that he expected to collectively outperform an index fund chosen by Buffett. The winner would get $1 million donated to a charity of his choice. Each man put $320,000 in bonds (for a total of $640,000) that were supposed to mature to $1 million by 2018. But with the rally in bonds, they're worth closer to $1.4 million today.Buffett’s S&P 500 (^GSPC) index fund, the Vanguard 500 Index Fund Admiral Shares (VFIAX), is trouncing the hedge funds. It was up nearly 66% from the time the bet began until the end of 2015, a return of about three times that of the funds chosen by Seides despite the fact that the index underperformed the hedge funds last year. The names of the hedge funds have not been released to the public.Wall Street legend Jack Bogle, the Vanguard Group’s founder and pioneer of index funds, said Buffett “is a believer” that hedge funds can’t beat the market over time.“He's been talking about indexing and the S&P 500 since before I ever met him,” said Bogle, whose Vanguard now has an astounding $3 trillion in assets under management. “He has set up a trust for his wife's estate?and has directed that 90% of it be invested in a low-cost?S&P 500?index fund.” ................
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