Market Overview

Buffett Raises Funds Managed by Underlings to $8 Billion

Warren Buffett told Bloomberg's Betty Liu in an interview that he is raising the amount of money overseen by Ted Weschler and Todd Combs from $2.75 billion apiece to around $4 billion. The former hedge fund managers were hired in recent years to manage investments at Buffett's holding company, Berkshire Hathaway (NYSE:BRK.B). Combs, 41, and Weschler, 51, will be given more responsibility in an effort to ease the eventual transition process at Berkshire. “They have terrific talent,” Buffett told Bloomberg, “I feel very, very, very good about where we are now versus a few years ago in terms of successor investment management.”

The two investment lieutenants will be given the leeway to manage the extra funds "exactly as they see fit," according to Buffett. Combs and Weschler will have responsibility for the firm's investments when Buffett is no longer active. He “has to assure himself and the firm that these people have the ability to deliver when he's gone,” Thomas Russo, a partner at Berkshire investor Gardner Russo & Gardner told Bloomberg. “If the experience is now just simply vetted trades that Warren would have done anyway, we haven't moved the needle.”

Even with the added responsibility, the amount overseen by Combs and Weschler isn't very significant compared to those still managed by the Oracle of Omaha himself. Even at the age of 81, and having recently been diagnosed with prostate cancer, there is little evidence that Buffett is slowing down. He is responsible for a portfolio of stocks valued at around $89.1 billion, including massive stakes in blue-chip companies such as Wells Fargo (NYSE: WFC), Coca-Cola (NYSE: KO), and American Express (NYSE: AXP), positions that Berkshire has held for many years.

Buffett told Bloomberg that Berkshire's recent foray into General Motors (NYSE: GM) was not one of his picks, but he declined to name who made the investment, which is down around 9 percent from its acquisition date. Among the stocks that Buffett has been responsible for picking in recent quarters are MasterCard (NYSE: MA) and DaVita (NYSE: DVA), a healthcare facilities company. Both of those stocks have risen since Berkshire purchased stakes.

Todd Combs previously ran a hedge fund called Castle Point Capital Management LLC, while Ted Weschler oversaw a fund called Peninsula Capital Advisors LLC. Their roles at Berkshire are big bumps up in prestige and responsibility, and the two investors may actually be taking a pay cut by working for Berkshire.

The pay package outlined by Buffett for the two managers at Berkshire's most recent annual meeting calls for an annual salary of $1 million plus 10 percent of the amount which their portfolios outperform the S&P 500 on a three-year rolling basis. He added that part of Combs' and Weschler's compensation is also dependent on the other's performance, giving them incentive to collaborate and share ideas.

Given the current low valuations and high dividend yields in stocks, the Berkshire investors may be actively deploying the new capital right away. Peter Rup, chief investment officer at New York-based Artemis Wealth Advisors, told Bloomberg that, “I would imagine that these guys are finding a lot of value. They could easily deploy an extra billion [dollars],” by adding to holdings or finding new investments.

Posted-In: Ted WeschlerNews Hedge Funds Movers & Shakers Management Economics Media General Best of Benzinga

 

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