Los Angeles Times – The hedge fund industry can only exist because investors believe their fund managers will deliver above-average returns over time, despite the portfolios’ hefty fees.

Master investor Warren Buffett, who has long derided those fees, now has made an interesting bet with a firm that runs so-called funds-of-hedge-funds: He’ll beat their net returns over the next decade simply by owning a mutual fund that tracks the Standard & Poor’s 500 index.

The bet is the subject of this article in Fortune magazine by Buffett’s long-time friend, writer Carol Loomis.

Buffett is going up against Protégé Partners LLC, a New York-based money manager that picks hedge funds for its clients.

Loomis writes: "Each side put up roughly $320,000. The total funds of about $640,000 were used to buy a zero-coupon Treasury bond that will be worth $1 million at the bet’s conclusion." Whichever side wins, the proceeds will go to charity.

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