A low-cost S&P 500 index fund has more than tripled in value since Warren Buffett's famous bet against hedge funds ended in 2017. This recent performance has outpaced the returns the index achieved during the original ten-year contest, raising questions about how much of the index's success is attributable to market timing versus the inherent advantages of passive investing.
The original wager, initiated in December 2007 and concluding at the end of 2017, saw Buffett's Vanguard S&P 500 index fund return 125.8% over the decade. In contrast, the five funds of funds selected by Protégé Partners, the asset manager that accepted the challenge, returned between 2.8% and 87.7%. The index fund's annualized return was approximately 8.5%, while the best-performing hedge fund returned about 6.5% annually.
Since the bet concluded, the same type of index fund has delivered significantly higher returns. Using the Vanguard S&P 500 ETF as a proxy, $10,000 invested at the close on December 29, 2017, would be worth approximately $33,300 as of recent market data. This represents a gain of about 233%, or nearly 15% per year with dividends reinvested. By comparison, the winning index fund in the original bet turned $10,000 into roughly $22,600 over its ten-year period.
The disparity in returns is largely driven by the specific timing of the original bet's start date. The first year of the contest, 2008, coincided with the global financial crisis, during which the index fund fell 37%. It was the only losing year for the index during the entire ten-year period. Excluding that single year, the index fund grew at an average rate of around 15% annually for the remaining nine years, a pace nearly identical to its performance since 2017.
Buffett's original argument centered on the impact of fees. In his 2017 letter to Berkshire Hathaway shareholders, he noted that investors in funds of funds paid fixed fees averaging around 2.5% of assets annually, plus a share of their managers' gains. He famously observed that while performance fluctuates, fees remain constant. The data suggests that the post-2017 period has not seen a sudden improvement in market efficiency but rather reflects a continuation of long-term trends unburdened by a catastrophic opening year.
The ride since 2017 has not been without volatility. The index experienced two losing years, 2018 and 2022, with the latter costing investors around 18%. In early 2020, the fund dropped approximately 34% between February and March. However, it rose in six of the eight full calendar years since the bet ended, with 2019 marking its best year at a 31% gain. As of early 2026, the fund is up around 14%.
Combining both periods, $10,000 invested at the start of 2008 would be worth approximately $75,000 today. This equates to an annualized return of about 11% over nearly 19 years, spanning two major crashes and other down markets. The evidence supports Buffett's thesis that low-cost index investing is a durable strategy, though investors should likely plan for returns closer to the original bet's 8.5% annual average rather than the higher rates observed in recent years.