Performance of Berkshire investment managers

[RolfGunderson]

Hi,

 

I was thinking about the criticism Buffett received this year re: investment underperformance on positions established in 2008 (COP, the Irish Banks, etc.). I also got to thinking that at the AGM, Buffett said (from Omaha World-Herald blog):

 

"There are four possible investment successors, and one or more could be chosen. They are from inside and outside Berkshire. The four investment managers did no better than match the S&P 500. In 2008 they did not cover themselves with glory, Buffett says, but neither did he, so he is tolerant."

 

I am having trouble finding the source, but I have a strong recollection of Buffett saying that he was going to have the investment successors manage funds (in the neighbourhood of ~$5 to $10 billion, if memory serves) on Berkshire's behalf to try them out.

 

Anyway, all to say that this got me to thinking perhaps most of Buffett's "duds" last year were not actually his and that their underperfomance weighed on Berkshire Hathaway's 9.6% drop in book value. However, making it clear to the masses that some or all of the poor investments were the work of the "successors in training" would be a terrible message to send out. I am not suggesting the Buffett didn't make any mistakes. I'm just wondering if they were amplified by the other managers.

 

Maybe I'm not the first to suggest this, but I haven't come across anything else positing this relationship. If the successors have that kind of capital under management and did no better than the S&P 500, I would think there have to be some large misses.

 

Anyway, just a thought seeking other views.

 

Dennis

[Rabbitisrich]

Probably not. Getting into oil too soon and the Irish banks were the major mistakes. Buffett defended the legitimacy of oil prices at $140+ by noting that the physical product exchanged at those rates.

[snailslug]

Munger said at the meeting that pretty much every investment manager that he follows and admires/thinks has a sensible approach "got creamed last year".

 

The two also said that they would be troubled if the possible successors had gone to an all cash portfolio, because they think it's very difficult to make that kind of macro call and be correct on a consistent basis.  Those aren't the types of people they want running Berkshire's portfolio.