Halls of Shrewd'm / US Policy
No. of Recommendations: 3
Does anyone have any insight on how Berkshire's investment portfolio will be managed after Buffett steps down? It's an important question. Buffett currently manages all of the approximately $700 billion investment portfolio, save for the roughly $17 billion that Ted manages.
No. of Recommendations: 1
The recent management changes made no mention of Ted Weschler. Tod Combs’s replacement as Geico CEO was announced but not who would manage his investment portfolio.
Buffett, responding to a question at the AGM had said capital allocation would be Abel’s responsibility. I for one don’t think Abel should personally handle all of Buffett’s investment portfolio. He has much more important responsibilities of overseeing all the wholly owned subsidiaries. Reading millions of pages of company reports like Buffett did would not be the best use of his time.
Giving Weschler a bigger portfolio to manage and bringing in additional investment managers would make more sense. Abel could get involved in investment above a certain size/complexity or acquisitions of companies.
No. of Recommendations: 6
Well, I’ll offer some thoughts, starting with the investment mix. Berkshire ended Q3 with $703.2B in investments, with the following investment allocation:
Equities, 40.2% ($282.3b)
Fixed income, 2.5% ($17.9B)
Cash, 10.2% ($72.1B)
T-Bills, 43.4% ($305.4B)
Equity method investments, 3.6% ($25.5B)
Asset allocation is the most important investment decision (both for Berkshire and for individual investors), more important than individual security selection. Who will make this decision?
Berkshire’s five largest equity holdings as of today are:
AAPL, 22.7% of equities (($60.6B)
AXP, 18.8% ($50.4B)
BAC, 11.0% ($29.3B)
KO, 9.9% ($26.5B)
CVX, 7.1% (19.0%)
I think that a reasonable choice to manage the $283b equity portfolio (40.2% of the total investment portfolio) would be Ted Weschler, Buffett’s choice to manage equities. I also think that Ted, with input from Greg Abel and the Board of Directors, would be a reasonable choice to determine asset allocation. Greg Able should not manage the investment portfolio, as he has no track record in doing so. Outside money managers should not be used to select securities or set asset allocation. The asset allocation and equity portfolio should be disclosed each quarter, as they are today. Also the track record of the equity portfolio and of the total investment portfolio should be publicly updated at least annually.
How's that for bold suggestions? Thoughts?
No. of Recommendations: 2
" Well, I’ll offer some thoughts, starting with the investment mix. Berkshire ended Q3 with $703.2B in investments, with the following investment allocation:
Equities, 40.2% ($282.3b)
Fixed income, 2.5% ($17.9B)
Cash, 10.2% ($72.1B)
T-Bills, 43.4% ($305.4B)
Equity method investments, 3.6% ($25.5B)
Asset allocation is the most important investment decision (both for Berkshire and for individual investors), more important than individual security selection. Who will make this decision?"............
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interesting to compare one's own approx. allocarion to BRK.....might be a better lesson, for me, anyway....
mine :
equities :60%
fixed income : 5%
cash : 10%
T bills : 10%
fixed assets :(eg property) 15%
No. of Recommendations: 14
No matter who manages the equity portfolio and the total investment portfolio, they're not going to outperform the market very much over the next 25 years. The T-Bills (currently 43% of the total investment portfolio) will return exactly what T-Bills return, and the equity portfolio (currently 40% of the total investment portfolio) will likely return very close to what the broad stock market returns, or at best 1 to 2 percentage points better. That's what the best value fund managers, even Buffett in the last 25 years, have returned. The good news is that the leverage that comes from insurance float of $173 billion will boost the return significantly. That's a leverage ratio of about 1.33x ($173B in float and $703B total investment portfolio value including float).
No. of Recommendations: 1
PS of my 60 % equities, 70 % is BRK.
No. of Recommendations: 2
" Giving Weschler a bigger portfolio to manage and bringing in additional investment managers would make more sense. Abel could get involved in investment above a certain size/complexity or acquisitions of companies.'
300 BILLION plus is a lot of money, even for Jim! It might not be a bad idea to give 25 billion to 4 proven money managers tho I'm uncertain how the SEC would respond to this news? Would the SEC require brkb to change its filing status?
No. of Recommendations: 1
" Outside money managers should not be used to select securities or set asset allocation. "
WHY would you oppose hiring proven money managers with proven track records managing a portion of our cash?
Haven't T and T proven that Buffett was correct decades ago, beating SPY is hard?
Would brk shareholders be better off today if we had been averaging into SPY weekly for the past 15 years?
No. of Recommendations: 2
"WHY would you oppose hiring proven money managers with proven track records managing a portion of our cash?"
It would be OK if their fees were low. Yale used outside money managers even though they had David Swensen. Buffett's plan was to use Todd and Ted after he stepped down, but he never gave them much money to manage. The latest estimate of their combined portfolios was $34B.
Whatever Berkshire does they should announce it soon. Stockholders deserve to know who is managing the $700B investment portfolio. That's a pretty big chunk of Berkshire's $698B stockholder equity. Todd is gone, and Buffett steps down in 19 days. Buffett has said that Greg Abel will be responsible for capital allocation, but I take that to mean acquisitions and the like, not day-to-day management of an investment portfolio. I'm sure that Berkshire's equity investment style will remain the same: build a concentrated portfolio of excellent companies when their stocks are available at attractive prices.
As to reporting, I think that Yale did a good job in their annual reports (although I admit that I haven't read them recently). They divided the investments into simple categories, as Berkshire does (equities, fixed income, etc.) and then reported the return of each category for the year and the expected returns for the future. Doing so gives clarity to shareholders; it does not give an advantage to competitors.
No. of Recommendations: 8
Todd is gone, and Buffett steps down in 19 days. Buffett has said that Greg Abel will be responsible for capital allocation, but I take that to mean acquisitions and the like, not day-to-day management of an investment portfolio...
I have also taken it to mean the decision of the *amount* of assets to delegate to portfolio manager(s) who are in practice generally limited to equities, maybe cash or the occasional bond deal. Mr Buffett decided how much T&T would manage, without telling them what to buy. I can imagine the same rule applying in future, in particular because Mr Abel has no known "stock picking" skill. Maybe the occasional big strategic investment that happens to be in a public company.
Jim
No. of Recommendations: 35
In the interest of providing an independent opinion to this very important question, my view below is posted before reading the responses in the thread.
The facts:
$380b+ in cash.
Large cap public companies fully valued, or overvalued.
Large private companies not willing to sell to Berkshire.
Berkshire not cheap enough for buybacks.
The operating companies continue to send huge amounts of additional capital to headquarters every week.
Warren can’t find anything of significance to buy.
This dry spell has lasted for a few years now (I think 2022 was the last year Warren was swinging when everyone else was selling).
Warren is stepping down in a couple of weeks. Berkshire and Mr Buffett do not tiptoe into decisions.
Greg Abel, will take FULL control.
He is not Warren Buffett but we certainly can’t complain, either how long Warren has kept going, or how good we should feel about Warren’s skill in picking his successor to manage the 2026 and beyond version of Berkshire. (A firm that has evolved many times over the decades to what it is today.)
I think if Warren was younger, he would maybe have done something about the current excess capital already but he may have been content to let things sit and clear out the concentration in Apple. Safe in the knowledge, that the baton is about to be passed and Mr Abel will begin to make his mark soon.
We of course don’t know what external events will unfold in 2026, in terms of opportunities. If everything stays elevated or goes higher, I don’t think Greg will let the cash build up for another year or two. It’s already a problem.
What will Greg do? If conditions remain identical, there is not much he can do, other than the taxable dividend leaver, or pile up even more capital until the price to book contracts sufficiently. I doubt he would deliberately pursue a strategy of crashing the price to book and would consider it unfair to selling shareholders.
I don’t think Greg, or anyone else is going to be able to pull off another Apple in current conditions. Stock picking on a major scale is kind of over, unless something major happens in markets. Certainly, the record since 2008, indicates that Berkshire’s size is too much of a handicap. If Warren can’t do it, Greg certainly can’t and I doubt anyone else will be trusted with the huge amount of excess capital.
Buffett has said buying the index is not appropriate, as investors could do that themselves. Market timing is a fools game according to Buffett.
I don’t know, but will conclude with dividends and buybacks seem increasingly likely. Unless the public and private market prices fall to a level that even a lessor mortal than Mr Buffett, could intelligently allocate the capital.
Will be interesting to see if there has been a temporary pause that is lifted during 2026.
Now I can read the other replies and see how wrong I am!
Also reminded of Charlie’s comments on the subject:
It’s a nice problem to have.
What kind of a world gives you Warren Buffett for 60 years and gives you someone not as good and you complain.
Berkshire is so strong now and has so much momentum, that in some ways, it’s a little easier to manage.
Speaking of Charlie. What are the top three ways to destroy Berkshire:
1. Buy low quality assets, or hugely overpriced assets. There are plenty on offer.
2. Take on lots of leverage.
3. Ramp up insurance premiums by reducing underwriting quality.
We can be sure Greg Abel will avoid irrational and group think behaviour like the plague. And as Charlie might have said: sure that’s half the battle won.
Have a lovely Christmas everyone and may there be many more here, after Mr Sunshine has retired, even if there is less to discuss.
Evbigmacmeal
No. of Recommendations: 2
" Market timing is a fools game according to Buffett."
What would you call what Buffett has been doing the past 5-8 years?
Hoarding T-bills?
No. of Recommendations: 7
Agree with your thoughts but I don't believe Warren stepping down means he will stop reading and thinking. In fact he will have more time to do that. Would he ever make a suggestion to Greg? Would Greg ever suggest that he's open to ideas?
Life is more fun being an optimist.
No. of Recommendations: 8
“I don’t know, but will conclude with dividends and buybacks seem increasingly likely.”
As time ticks and we see so few opportunities, I just sense we will see sizable buybacks from Greg at less of a discount to IV, rather than a “special” or quarterly dividend.
Even Charlie said in a meeting a few years ago that he hinted don’t be surprised to see a good bit more repurchases. I wouldn’t be disappointed given our circumstances of $370-380B (30%) cash equivalents & growing daily.
Wishful thinking perhaps!
No. of Recommendations: 26
" Market timing is a fools game according to Buffett."
...
What would you call what Buffett has been doing the past 5-8 years?
Hoarding T-bills?
It's probably fair to note that market timing is different from market pricing. Market timing involves having a reasonably strong opinion about the next direction of price movements, which I'm pretty sure he doesn't.
I would say the absolute limit of "market timing" for Mr Buffett is the existence of the word "probably" in this philosophy:
"I don't see any good opportunities today, so I'll sit on cash for now. The wait for better picks will probably be short enough that it will be worth the wait"
Jim
No. of Recommendations: 1
" It's probably fair to note that market timing is different from market pricing. Market timing involves having a reasonably strong opinion about the next direction of price movements, which I'm pretty sure he doesn't.
I would say the absolute limit of "market timing" for Mr Buffett is the existence of the word "probably" in this philosophy:
"I don't see any good opportunities today, so I'll sit on cash for now. The wait for better picks will probably be short enough that it will be worth the wait"
Jim"
Good morning old bud, it's amazing how you can rationalize and explain away 20 years of huge errors.
Refusing to authorize and aggressively act on buybacks, at material discounts to IV, was a huge mistake, beginning 20 years ago.
Not acquiring the, right of first refusal on all Foundation sales, was a huge unforced error 20 years ago.
Refusing to pay a forensic accountant, to review all major capital allocation decisions has been a huge, unforced error. We saved millions in fees and often overpaid by tens of billions, square that math old bud.
Refusing to initiate a small quarterly div has been a huge error. in 2026, 27 the latest, you will see the evidence.
Most public securities sales have been poorly timed, market timing, or whatever you choose to call it is hard.
Come on man, once every 25 years even you can agree on 1 or more unforced errors, is that too much to ask?
SHOCK brkville old bud, you can do this, were any decisions HE made the past 25 years, sub optimal? I LOVE the guy but perfect and beyond criticism crosses the line from love and respect to worship!
AAAAAAAAAAmen! hc, your pal in Las Vegas.
No. of Recommendations: 1
We all know trump wants sharply lower short rates. It remains to be seen if he can get longer rates down as well, tho I doubt it.
What do we do with 300 Billion plus of cash into sharply lower short rates which might result in higher stock prices during the remaining three years? Continue to hoard cash?
Keep in mind brk has no obligation to disclose SEC comment letters, who knows why we hired the new in-house lawyer? What are the material issues facing brk?
Thank you.
