Berkshire Hathaway Another Step Closer To Buffett Succession


On 10/25/2010, Warren Buffett’s Berkshire Hathaway Inc. announced that Todd Combs has been hired as an investment manager. The announcement helps to partly answer with some degree of certainty, the question of which individuals will take over Buffett’s responsibilities as chief investment officials, upon his succession.

Warren Buffett commented that “for three years Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s investment portfolio. We are delighted that Todd will be joining us”.  Buffett’s public announcement and praise of the investment manager, illustrates his confidence in both his abilities & qualities.

Todd Combs, 39 comes from Stone Point Capital LLC, a private equity firm that has been making investments in the global financial services industry for more than twenty years. Stone Point Capital is best known for their private equity Trident Funds. Combs managed Castle Point Capital Management, an equity hedge fund of Stone Point, that focused exclusively on the financial services sector.  The fund was formed in 2005 using seed capital from Trident III.

Buffett had previously mentioned that his current responsibilities of CEO and CIO would be split among three or more people.  The CEO would manage the operating units, while there would be one or more chief investment officers managing Berkshire’s investments.

Ajit Jain, 59, who currently heads several reinsurance businesses for Berkshire Hathaway has often been touted as a possible successor for the chief investment officer role, and has received much public praise by the billionaire in interviews as well as in shareholder letters.  Li Lu, 44, hedge fund manager of LL Investment Partners LP has also been mentioned by Charles Munger (Berkshire’s vice-chairman) and Warren Buffett as an ideal candidate back in July 2010.  Munger had stated that “in my mind, it’s a foregone conclusion” that Li was likely to become part of Berkshire investment heads. Buffett had stated that Li fits the role and said “you want someone [who] can think about problems that haven’t yet existed before” and “we don’t want them unless they have special feelings about Berkshire”.  Charlie Munger and Warren Buffett are investors of his fund and he has close long-time relations with them.  Li Lu had introduced them to the Chinese battery and auto maker BYD Company Limited.

David Sokol (the CEO of subsidiary NetJets and Chairman of subsidiary MidAmerican), as well as Tony Nicely (the CEO of subsidiary GEICO), have often been touted as a possible successors for the Berkshire’s CEO role.  However, David Sokol, seems to be the more likely candidate and has been praised and mentioned many times by Buffett.

If we imagine Sokol as CEO, and Jain, Combs, and Lu, as chief investment officers, Berkshire’s future already looks to be in very capable hands.

Stone Point Capital LLC:
http://www.stonepoint.com

Castle Point Capital Management:
http://www.stonepoint.com/investments-castle-point.php

Berkshire Hathaway official news release:
http://www.berkshirehathaway.com/news/OCT2510.pdf

Thanks & Happy Investing! – The Investment Blogger © 2010
Follow Me On Twitter!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s