Manager’s $5M Buffett lunch pays off

 

Ted Weschler, manager of Peninsula Capital Advisors, a Virginia-based hedge fund with $2bn in assets under management, will join in 2012 to manage a $1bn-$3bn slice of Berkshire’s $66bn in equity securities, the company said on Monday.

Mr Weschler is expected to serve alongside Todd Combs, formerly manager of hedge fund Castle Point Capital, who was appointed in 2010, as part of a new generation of managers who will oversee Berkshire’s equity and debt investments. Berkshire said it might add a third new manager.

Berkshire will also have to find a replacement for Mr Buffett, who is 81, as chief executive of Berkshire itself. Thinking on that part of the succession was thrown into turmoil when David Sokol, a senior lieutenant, was found to have bought shares in a company he later recommended to Berkshire. Mr Sokol resigned, and Mr Buffett apologised to shareholders.

In a statement on Monday, Berkshire said; “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.”

Mr Weschler, who is not widely known in the fund management community, first came to Berkshire’s attention when he spent more than $5m in charity auctions to have lunch with the legendary investor, according to an interview with Mr Buffett in Fortune magazine.

The unusual nature of their meeting raised questions about the level of involvement of Berkshire’s board in the process of choosing a replacement, said Alice Schroeder, author of The Snowball, a biography of Mr Buffett. “Only at Berkshire Hathaway can you get a job by paying $5m for an interview,” she said.

Earlier in his career, Mr Weschler also attracted attention when Peninsula helped finance the merger of airlines US Airways and America West in 2005.

Media groups are a focus for Mr Weschler’s fund. As of June 30, holdings included Liberty Media, Valassis Communications and Cogent Communications. The fund also owned $491m in shares of WR Grace, a chemicals and materials group where Mr Weschler worked in the 1980s.

“You can observe from Mr Weschler’s portfolio that he’s focused on Berkshire-esque companies — stronger balance sheets, strong, visible future cash flows, and relatively inexpensive valuations,” said Lawrence Creatura, a portfolio manager at Federated Investors. “It appears Mr Buffett is trying to continue the philosophy.”


 (FT.com)

 

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