Warren Buffett Hires New Investment Manager

Berkshire Hathaway has announced that Todd Combs, 39, the portfolio manager of the hedge fund Castle Point Capital, will soon be joining Berkshire as an investment manager.  

Warren Buffett stated: “For three years Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s portfolio.  We are delighted that Todd will be joining us.” 

At the May 5, 2007 Berkshire Hathaway Annual Meeting, Buffett responded to a shareholder question on this subject as follows:

                Berkshire has received 600-700 applications.  One or more investment officers will be hired.  The successful candidate(s) should be able to scale up from $100 million to $100 billion and perform “mildly better” than the S&P 500 while managing $100 billion under the unprecedented conditions of the future. Many smart people have gone broke even though they were right  99% of the time.  We are looking for someone who can judge and avoid high risk situations.  Berkshire may initially hire 3 – 4 people with each being given $3 – $5 billion to manage.  Then one or more will get the job.  In 1969, when Warren Buffett ended his investment partnership, he referred his investors to Charlie Munger, David Gottesman, or Bill Ruane (Sequoia Fund).  In 1979, Warren Buffett hired Lou Simpson as the chief investment officer for GEICO. Since Warren Buffett was able to identify these superior money managers in the past, he expects to do likewise in his current search.  (Note:  In late August 2010, Lou Simpson announced that he planned to retire at the end of 2010.)

From Castle Point Capital’s latest SEC Form 13F filing, as of June 30, 2010 its ten largest holdings, primarily shares of  financial services companies, were:

                                    Market Value           Percentage of Portfolio

(1) U.S. Bancorp ($22.8 million)                             8%

(2) Mastercard  ($20.4 million)                               7%     

(3) State Street  ($19.0 million)                               7%      

(4) Western Union  ($18.3 million)                         7%

(5) CME Group  ($14.4 million)                                 5%

(6) Renaissance Re  ($14.3 million)                         5%

(7) Pennymac   ($13.0 million)                                  5%

(8) Chubb ($12.8 million)                                             5%

(9) Starwood Property Trust ($12.5 million)        4%                                                         

 (10) Annaly Capital ($12.2 million)                        4%

The top ten holdings comprise 57% of the fund’s total long positions of $279.7 million.