Berkshire Hathaway Moves Step Closer to Buffett Succession

Warren Buffett’s Berkshire Hathaway Monday said hedge fund manager Todd Combs would join the firm, potentially bringing the company a step closer to solving Buffett’s succession puzzle.

Berkshire Hathaway owns multiple businesses concentrated in insurance as well as tens of billions of dollars in stocks. Buffett, 80 and among the world’s richest men, has run the Omaha, Nebraska-based conglomerate since 1965. Its other interests run from railroads to ice cream.

“The fact that he’s come public with one of the names means he must be pretty confident in Mr. Combs, or why release the name. It’s not been his practice,” said James Armstrong, president of Henry H. Armstrong Associates in Pittsburgh, who oversees $400 million and owns Berkshire stock.

Buffett said in a statement that he and partner Charlie Munger looked for three years for someone like Combs “to handle a significant portion of Berkshire’s investment portfolio.”

Combs, 39, has been managing Castle Point Capital for the last five years. It is a long/short equity hedge fund that focuses exclusively on financial services. No one from Castle Point was available to comment on Combs’ departure.

He managed $395 million as of July 1, according to an investor letter obtained by Reuters. From its November 2005 inception through June 2010, his fund was up 28 percent, against a 49 percent drop in his benchmark, the SPDR Financial Services sector fund .

UNEXPECTED NAME

Buffett had addressed his succession in May, saying his position would ultimately be split into a CEO role and three or four investment chiefs. There has been speculation since then on who they would be and when they would be hired.

Combs, however, had not figured in that speculation.

“It’s not a name I’ve heard before and I’ve been studying Berkshire for 25 years,” Armstrong said. “I’m sure there’s a connection of some kind, but this is not one of the obvious candidates, which is fine.”

Combs’ appointment comes just hours after Berkshire disclosed a dispute with securities regulators over its accounting for investments.

The firm filed a series of letters with the Securities and Exchange Commission, disclosing that the SEC challenged Berkshire in April on its accounting for stock investments with long-term losses.

Berkshire responded in May that those investments — especially in Kraft and U.S. Bancorp — were long-term holdings with the potential to appreciate, and that the firm therefore did not see the need to recognize losses on them.

Buffett was also in the news Monday afternoon, when he told Fox Business Network that Goldman Sachs has not approached him about unwinding his $5 billion preferred stake in the firm, despite recent press speculation Goldman was on the verge of doing so.

(Reporting by Ben Berkowitz, additional reporting by Joseph A. Giannone; Editing by Robert MacMillan, Phil Berlowitz and Gunna Dickson)