You're also forgetting how much the compounding of the fees can cost, and you have two layers of them. This could easily make the S&P at least 3x higher in returns after 10 years.
In CFA Institute's estimate, the difference in fees only made up about half of the underperformance at the end of 2014, especially considering that 2008 was an easy win for hedge funds:
https://blogs.cfainstitute.org/investor/2015/02/12/betting-w...
Note that at the end of 2015, eight years had elapsed, not ten.
The short portion of the hedge fund will have been losing as we are in a bull market. The full length of a cycle should see this effect reverse (and indeed 2008 shows this).
So Buffet did have to pick a bull market in making this bet, but he still had better than 50/50 odds regardless.
You also have other costs specific to hedge funds over active funds, such as higher brokerage from more frequent trades, and short interest. These have the same drag as the management fees, and I should have included that also in the description.
The returns are far from indiscernible from S&P 500. At the end of 2015, the S&P 500 portfolio had seen 3x the profits of the Protégé portfolio.