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Buffet's S&P 500 index is outperforming a "fund of hedge funds" by a wide margin - 65.7% to 21.9%. One key reason why the S&P 500 has outperformed is fees - from both hedge fund managers and the fund of funds. However, the funds have yielded 49% before fees, still failing to match the S&P 500 index.
Start with the fact that it’s harder to pick five stellar funds than one. And each fund of funds is invested in many underlying hedge funds. Most likely, the Protégé group is invested in well over 100 individual hedge funds. The chance of identifying 100 truly stellar funds is close to zero. Each of the individual hedge funds is itself diversified, owning 30 to 50 or even more securities. Allowing for overlap, the Protégé Group probably owns more than 1,000 different securities in all. That would make it pretty close to an index fund--only with super-high fees. Ted Seides, the former Protégé partner, told me that over the eight years, his funds of funds have delivered a gross return of 49%, about 5% a year. In other words, even ignoring fees, all their talent and hard work underperformed an index
http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/
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