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Berkshire Adds New Investment Manager to Handle Portfolio

Source: WSJ - Erik Holm


Posted on 13 Sep 2011

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Warren Buffett chose a second little-known hedge-fund manager from obscurity on Monday to handle a portion of Berkshire Hathaway Inc.'s huge investment portfolio.

The selection of Ted Weschler, managing partner of Peninsula Capital Advisors, is the most recent move to prepare Berkshire for the day when Mr. Buffett, 81 years old, will no longer run the company.

The succession plan at Berkshire is one of the most closely watched in the U.S. business world. Mr. Buffett—who serves as Berkshire's chairman, chief executive and head of investing—has said he and the company's board plan to spread his responsibilities at Berkshire among several people.

Mr. Weschler, 50, will join Todd Combs, 40, named by Mr. Buffett last year, in handling a fraction of Berkshire's $66 billion stock portfolio for the time being. When Mr. Buffett steps aside, the two men, and perhaps a third person, will have responsibility for all of Berkshire's equity and debt investments, the company said in a statement Monday.

Mr. Buffett and Berkshire's board also have a handful of candidates to take over the CEO role. The names on that list haven't been revealed to the public. Until earlier this year, the leading candidate had been thought to be David Sokol. He had been a key Buffett lieutenant until he stepped down amid questions about whether he abused his position by making a timely investment in a company that Berkshire later agreed to buy.

Mr. Buffett has said his son, Howard Buffett, could serve as Berkshire's nonexecutive chairman.

Mr. Buffett, among the world's most celebrated stock pickers, has used Berkshire's investing profits to transform a failing textile company over four decades into one of the largest conglomerates in the U.S. He has long overseen almost all of Berkshire's investments, but holdings at Berkshire-owned car insurer Geico Corp. were handled until the end of last year by another manager, Lou Simpson. The search for new investment managers intensified when Mr. Simpson elected to retire.

Mr. Buffett surprised Berkshire-watchers in October when he said that Mr. Combs, a little-known manager of a $400 million hedge fund, would take over a portion of the investing duties. Mr. Combs's portfolio at his Connecticut-based fund, Castle Point Capital, was heavy on financial-services stocks.

"With Todd and Ted on board, Berkshire is well-positioned for successor investment management at the time Mr. Buffett is no longer CEO," Berkshire said in its statement Monday.

Mr. Weschler told investors in his Charlottesville, Va.-based fund that he will be winding down the fund as he prepares to join Berkshire early next year, the statement said. He didn't immediately respond to a request for comment.

Mr. Weschler's fund, which he has run for more than a decade, held positions in nine stocks worth a total of $2 billion as of June 30, according to a regulatory filing.

Peninsula's largest disclosed position was a 1.4% stake in DirecTV Group Inc. The holding was valued at about $508 million at June 30. He also had positions in Liberty Media Corp., coupon company Valassis Communications Inc. and dialysis provider DaVita Inc.

Robert Johnson, senior managing director at the CFA Institute in Charlottesville, knows Mr. Weschler through a local running group. "When you meet Ted, you just know right away that he's a straight shooter and you can trust him," Mr. Johnson said. "Ted's also incredibly hard-working, and the hours that he puts in are above and beyond—14 hours might be kind of a light work day. Being able to train for a marathon while working those hours shows his discipline."

According to Fortune magazine, Mr. Weschler appeared on Mr. Buffett's radar when Mr. Weschler won Buffett's annual charity auction with a bid of $2,626,311 in 2010. He also won again this year, topping his prior-year bid by $100. The winner of the auction gets to dine with Mr. Buffett.

Winners of the auction are usually announced by the Glide Foundation, the San Francisco-based charity that receives the proceeds from the auction.

Mr. Weschler had elected to remain anonymous until Monday, when Fortune disclosed that he had been the top bidder.

It was at the second meal that Mr. Buffett asked Mr. Weschler to shut down his hedge fund and work for Berkshire, Fortune reported.

Mr. Weschler told Mr. Buffett he'd take the job "within weeks" of the July 26 meeting, according to Fortune.

Mr. Weschler and his wife have donated to several local Charlottesville charities, including the Building Goodness Foundation. The group's mission is focused on the construction of community buildings, such as emergency shelters in disaster areas or community centers in parts of the developing world, says Allison Scholl, the foundation's director of resource development.

The Weschlers donated last year to the construction of a trade school in Haiti, Ms. Scholl says, and building at the site will take off this December. They've been long-term supporters of the foundation. "They've been wonderfully supportive," Ms. Scholl said.

Mr. and Mrs. Weschler also contributed to Children, Youth & Family Services, a locally based nonprofit group that addresses poverty, abuse, child-care quality and adolescent runaways. The couple has made numerous annual gifts to the group and last year made a gift toward the nonprofit's capital campaign to purchase a new building.

In recent years, Mr. Weschler has made several donations to Republicans and Democrats, according to OpenSecrets.org, a site that tracks political contributions.

In 2010, Mr. Weschler gave $10,000 to both the Democratic Party of Virginia and the Republican State Committee of Delaware, according to OpenSecrets. In 2009, he gave to Michael Castle, a former Republican governor of Delaware and former member of the U.S. House of Representatives, according to the site. That same year, he gave to Robert Wittman, a Republican representative for Virginia's 1st congressional district and Tom Perriello, a former Democratic representative of Virgina's 5th congressional district, according to the site.


Comments

 
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