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Buffett adds little-known fund manager to team

Warren Buffett advanced his succession plan on Monday by naming Ted Weschler, a low-profile hedge fund manager, to help manage the investments of Berkshire Hathaway Inc.
Image: File photo of Berkshire Hathaway's Warren Buffett attending the 2010 Fortune Most Powerful Women Summit in Washington
Warren Buffett advanced his succession plan on Monday by naming Ted Weschler, a low-profile hedge fund manager, to help manage the investments of Berkshire Hathaway Inc. Jason Reed / Reuters
/ Source: Reuters

Warren Buffett advanced his succession plan on Monday by naming Ted Weschler, a low-profile hedge fund manager who has produced out-sized returns in the last decade, to help manage the investments of Berkshire Hathaway Inc.

Weschler, 50, paved the way for his new high-profile job by paying more than $5 million in charity auctions to have lunch with Buffett twice over the past two years.

Unlike many who bid to have the annual charity lunch with Buffett to benefit anti-poverty group Glide, Weschler insisted on anonymity -- wanting his name to be kept out of the headlines and requesting a change of venue from the New York steakhouse where the lunch is usually held, according to journalist Carol Loomis, a longtime Buffett friend and ghost-writer.

Instead, Weschler met Buffett on his home turf in Omaha. Wechsler paid slightly more than $2.6 million both last year and this year for the charity lunches for a total of $5.25 million, possibly the most expensive job interviews on record.

The path for Weschler to join Berkshire was laid at this year's lunch when Buffett pitched the idea of a move to Omaha, Buffett told Loomis. "I very much wanted him to do it, but I didn't expect to get very far with the idea," Buffett said.

"Ted will no doubt make a lot of money at Berkshire. But he was already making a lot of money with his fund -- you can get an idea of that from the size of his (charity) bids -- so money wasn't a reason for him to come."

Wechsler will start at the company early next year and work with Todd Combs, who joined Berkshire last year, to manage its equity portfolios. Buffett, 81, has said he may also bring in a third manager, but meanwhile he continues to oversee the lion's share of the company's $52.36 billion in U.S. equities.

Weschler, like Combs before him, has succeeded while keeping a low profile far from the canyons of Wall Street.

The Charlottesville, Va.-based money manager delivered total gains of 1,236 percent over the last 11 years, according to investors. Over the same period of time, Berkshire's own Class B shares have risen 84 percent and the S&P 500 index has fallen nearly 23 percent.

As of June 30, his Peninsula Capital Advisors had long positions in about $2 billion worth of stock, according to regulatory filings. Combs was managing about $400 million when he was hired.

Since Combs was hired, Buffett has made clear there would be more people added to the investment team to replace him eventually. When and how many, however, have been open questions that have weighed on Berkshire's stock, some analysts following the stock have said in recent weeks. Some investors say Berkshire shares are currently at their most undervalued in a generation.

One of Buffett's potential successors, David Sokol, resigned from Berkshire in March after it was revealed he had bought $10 million in Lubrizol shares and then recommended that Berkshire by the company. Sokol made $3 million when the acquisition went through.

A number of Buffett's best-known biographers, as well as prominent fund managers including Mario Gabelli, all told Reuters Insider they were not familiar with Weschler or his work. The same was true when Combs was appointed last year.

Moments after one of the biggest personnel mysteries in finance was lifted and Weschler was named as one of a likely trio of heirs to Buffett as managers of Berkshire's investment portfolio, he kept to his usual routine. He was at his desk at Peninsula -- the hedge fund he founded in Charlottesville, Virginia, in 1999 -- dialing investors, his receptionist said.

Weschler has overseen a very concentrated portfolio with DirecTV, DaVita, which runs kidney dialysis centers, and Liberty Media, ranking among his biggest and most recent holdings.

In total, he held fewer than a dozen publicly traded U.S. stocks at the end of the second quarter, according to his most recent regulatory filing. He is not required to list stocks he may be shorting or otherwise betting against.

Weschler earned an undergraduate degree in economics from the Wharton School at the University of Pennsylvania, where Buffett began his own undergraduate education decades ago.

Before starting his stock-picking career in Virginia, Weschler worked at specialty chemicals and materials company W.R. Grace, where he at one time was assistant to the vice chairman.

In Charlottesville, a city one-quarter the size of Omaha, Weschler and his wife have supported a number of charities from helping sponsor a youth film festival to donating to one that builds structures for communities in need.