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Billionaire Buffett winning $1 million bet

© Rick Wilking / Reuters / Reuters

Berkshire Hathaway Chairman Warren Buffett.

It’s the kind of wager only a billionaire investor could make.

Four years ago, Warren Buffett bet that a so-called "fund of funds" couldn’t beat the stock market over a decade. The winner would get $1 million for a charity of choice when the wager ends Dec. 31, 2017.

So far, Buffett’s winning, according to Bloomberg News.

The wager started on Jan. 1, 2008, and it pits Buffett, 81, against Protégé Partners LLC, a New York fund that invests in hedge funds. Protégé built an index of five funds that invest in hedge funds to compete against a Vanguard mutual fund that tracks the Standard & Poor’s 500-stock index, Bloomberg said.

Bloomberg notes that the Vanguard fund’s low-cost Admiral shares returned 2.2 percent, with dividends reinvested, from the start of the bet through Feb. 29, as stocks rebounded from a 12-year low in March 2009.

However, the hedge funds fell about 4.5 percent, Bloomberg said.

“Hedge funds of funds have underperformed because of high fees and mediocre manager selection,” Brad Alford, head of Alpha Capital Management LLC in Atlanta, told Bloomberg.