No money manager wants this deal

No money manager wants this deal 150 150 JP

In the finance world Warren Buffett stands alone. There are plenty of others that make investors money, but very few to the same extent and none as ethically. When he started his investment partnership in the 1950’s he basically guaranteed a 4% return with the caveat his partners would split the profits above that hurdle with him. It was a good deal.

As he began to manage more money, that arrangement evolved into a 6% hurdle (no guarantees) and 25% split. He crushed it, to say the least. Then he found a way (via Berkshire) to provide zero management fees or incentive fees and still build wealth for himself and investors. This progression is not one many take in today’s business world.

I’ve always thought it would be worthwhile for investors to demand a hurdle rate closer to that of the S&P 500, even making it variable. And, then negotiate the splits above and beyond that rate. Even if the manager matched the fees of a Vanguard index fund as their management fees, it would be fair on both ends. I’m not sure what firm is doing this, but the model seems to be worth trying.

The next chapter…

In 2018, I had ceased publication of my paid newsletter and while I was still writing articles for GuruFocus, my main work was with business leaders. By 2019, I had started a company called Key Bridge, named after a landmark here in Washington, DC; and as a foundational tenet of the new service. A pandemic and many rounds of golf later, we’re building again.

Washington, DC 20003