Only a highly confident investor would bet against Warren Buffett. But Ted Seides had the humility to admit that his loss of $1 million is all but certain. Unlike what most believe, though, he said the high fees charged by his hedge funds were not to blame.

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When Seides was introduced as the only man “brave enough” to answer Buffett’s call to place a bet against anyone where hedge funds would be pitted against low-cost passive investments, he was quick to clarify that he would be better characterized as ”stupid enough” to take on Buffett.

The bet, which was made almost 10 years ago, will be settled at the end of this year. The $1 million wager put the 10-year performance of the S&P 500 against a selection of five hedge fund-of-funds from 2008-2017. With hedge fund performance lagging throughout the last decade, Seides has conceded to losing the wager with Buffett.

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He will donate the $1 million to a charity of Buffett’s choice.

Seides is the managing partner of Hidden Brook Investments, LLC, an advisory and private investment firm. He was a founder of Protégé Partners LLC, a multi-billion dollar alternative investment firm in the hedge fund space. Previously, he worked at the Yale University Investments Office.

Seides spoke at the University of Virginia Investing Conference on November 10. He talked about why he wouldn’t make the bet again, citing recent changes in the hedge fund industry as a concern.

I’ll come back to Seides’ thoughts on the decline of the hedge fund industry, but first let’s look at how he ended up on the losing side of a bet with Buffett.

Why Seides thought Buffett was the patsy at the poker table

Seides opened, tongue-in-cheek, by saying, “I really never get a chance to talk about it.”

Seides walked through how he first got involved in a wager that would lead to him being forever known as “the hedge fund guy.”

“I was sitting around my office in the summer of 2007, and at the time our fund was short subprime and long risk assets. I never slept better in my life,” Seides said.

“And the markets have a tendency to make it so if you’re doing well, you think you’re much smarter than you are,” Seides said candidly.

After a successful start with his newly founded firm, Protégé Partners, Seides decided to challenge Buffett’s claims calling into question the value of the hedge fund industry.

“I had heard that Warren made a statement about hedge funds to the market and he wrote something in an annual letter about fees,” Seides said.

“Then I saw a transcript of a Q&A [from an event Buffett attended] where a student had said to him, ‘Well, if you think the market could beat hedge funds, why didn’t anyone take you up on the bet?’,” Seides said.

By Marianne Brunet, read the full article here.