Game on...

The players: Warren Buffett, the celebrity CEO of Berkshire Hathaway [he owns 38% of the shares] and Protégé Partners LLC, a New York based wealth management firm.

The bet is between Warren Buffett [not Berkshire] and Protégé [the firm, not its funds].

The bet: Over a period of 10 years [from Jan 1, 2008], Protégé has challenged that their 5 selected funds of hedge funds will outperform the S&P 500 after commissions [c2.5%], management fees [c23%] and expenses.

Warren Buffett has long advocated that the high fees charged by such funds far outweigh any additional earnings over S&P 500 growth [Remember: the investor does not get more than c75% of the accrued earnings - net of commissions and fees]. Protégé believes that their expertise in wealth management means that their selected funds bring better returns, even after the commissions and fees charged to the clients.

Each player has put $320,000 into a zero-coupon treasury bond for now. The winning, which will be in excess of $1m will go towards the charities already identified by the players.

What is in it for the players?
If all the winnings will go to charities – what is in it for the winner? For Warren Buffett – it's nothing more than proving a point he's promoted all his life – that no hedge fund can give better net returns than what the individual investor can invest and make. For Protégé – they've got more free publicity than they could ever imagine by going into this bet with Warren. If they win, they will be the golden boy of hedge funds. If they lose, the loss will not be entirely theirs – investors will look at all hedge funds with equal suspicion.

Who would you go with?
On one side we have Warren Buffett – the richest man in the world [self-made; net worth c$62b], who has made all his wealth by investments and is regarded as the top money manager of the 20th century. His Berkshire Hathaway [NYSE: BRK.B] owns 13% of American Express, 7% of The Coca Cola Company and 8% of Kraft Foods, to name a few.

On the other side is Protégé Partners LLC - a wealth management firm whose very existence depends on outperforming S&P 500 to give higher returns to their investors. They must have been exceptionally careful in selecting these 5 funds of hedge funds [only known to them and Warren Buffett].

The performance will be compared every year at the Berkshire Hathaway annual conference. The 10 year period irons out a lot of peaks and falls to bring realistic results, but we will have to wait till 2017 for the final winner.

For now, the game is on…and if history is any indicator, my money is on Mr Buffett. Who would you go with? Click comments [below] to leave your vote please.