Monday, September 12, 2011
Buffett Hires Hedge Fund Manager Ted Weschler
Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) hired Ted Weschler to help oversee investments and may add another fund manager as the firm prepares a new generation of leaders.
Weschler, 50, has told limited partners at his Charlottesville, Virginia-based Peninsula Capital Advisors LLC that he will be shutting the fund and will join Berkshire early next year, Buffett’s company said today in a statement.
Berkshire plans to divide Buffett’s responsibilities as chief investment officer among as many as three money managers. Buffett, 81, last year announced the hiring of hedge-fund manager Todd Combs.
“After Mr. Buffett no longer serves as CEO, Todd and Ted - possibly aided by one additional manager - will have responsibility for the entire equity and debt portfolio of Berkshire, subject to overall direction by the then-CEO and board of directors,” the Omaha, Nebraska-based company said in the statement. “With Todd and Ted on board, Berkshire is well- positioned for successor investment management at the time Mr. Buffett is no longer CEO.”
Buffett, who also serves as chairman, will continue to manage most of Berkshire’s funds until his retirement, according to the statement. Berkshire’s stock portfolio was valued at more than $67 billion as of June 30, including the largest stakes in Coca-Cola Co., American Express Co. and Wells Fargo & Co.
‘Under the Radar’
Peninsula had about $2 billion in the stock of nine companies as of June 30, the firm said in a regulatory filing. The holdings included investments in satellite television provider DirecTV (DTV), specialty chemical-maker W.R. Grace & Co., and dialysis facility owner DaVita Inc. (DVA), the filing showed.
“One of the things that Buffett is looking for is some really good talent that’s probably under the radar screen,” said David Rolfe, chief investment officer of Berkshire investor Wedgewood Partners Inc.
Peninsula returned 1,236 percent from early 2000 through the first quarter of this year, Fortune reported today in an article by Carol Loomis, a friend of Buffett. Peninsula is a long-short fund, meaning it can bet on rising and falling stocks.
Weschler previously worked for six years at Columbia, Maryland-based W.R. Grace and also helped start a private-equity fund, Quad-C Management Inc., according to Loomis. An office manager at Peninsula declined to comment on Weschler’s appointment and Peninsula’s performance.
‘Dining With Buffett’
Weschler was identified by Loomis as the anonymous bidder who won meals with Buffett through two of the annual auctions he holds to raise funds for the Glide Foundation to aid the homeless. The two bids cost Weschler a combined total or more than $5 million, she reported.
Rolfe said the next investment manger hired by Buffett may specialize in bonds. Berkshire’s fixed maturity portfolio was valued at more than $35 billion, including non-U.S. government bonds and corporate debt.
Berkshire said in February that there are four potential candidates to replace Buffett as CEO, without naming them. The CEO will supervise more than 70 subsidiaries, while the investment heads will run portfolios that include premiums from insurance operations. Ajit Jain, Berkshire’s reinsurance chief, was praised by Buffett in March as a manager with the ability for the CEO job.
Buffett has said his son, Howard Buffett, a Berkshire director, would be an effective non-executive chairman. Berkshire Vice Chairman Charlie Munger is 87.
Combs, 40, who specializes in stocks, will receive contingent payments based on his performance relative to the Standard & Poor’s 500 Index, Buffett said in February in his annual letter to shareholders. Investment managers may have 20 percent of performance compensation based on the group’s achievements, Buffett wrote.
“We want a compensation system that pays off big for individual success but that also fosters cooperation, not competition,” Buffett said in the letter.
Berkshire said the search for investment managers intensified after the departure last year of Lou Simpson, 74, who oversaw investments at the Geico subsidiary.
Buffett said in his letter that his strategy is to attract talent that can generate profits for decades rather than draw a “big name” that will impress commentators.
“I wonder how many of them would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959,” Buffett wrote.
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