TonyCinTX

Money Managers and the Berkshire Hurdle

I am long Berkshire as well.

Note that Buffett himself acknowledges TVB's point and has said BRK is so big it cannot achieve the returns it had in the early years.

The hedge fund manager's argument can be straight from Buffett himself: Warren has said he could earn 50% annually in the market if he were investing millions, but there is an upper limit because the companies that can deliver that kind of return are small and don't scale instantly.

But suppose we are talking about a $50M fund, if it earns 50% that is $25M, if the manager takes 20% and leaves investors $20M, that is 40% on the money. That beats the hell out of Buffett's average of 14%.

That would be the model argument for a hedge fund manager that wanted to claim he is the 40 year old clone of WB and wants us to pay him $5M a year.