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The mantra ‘Be like Buffett’ takes on new meaning – Republic World

The mantra ‘Be like Buffett’ takes on new meaning – Republic World

Warren Buffett’s Top Picks | Image: Pixabay

American idols. It’s not just the masses who flock to Berkshire Hathaway’s annual investor conference in Omaha, Nebraska, who are looking to boss Warren Buffett for advice. Financial masterminds like Blackstone’s Steve Schwarzman and KKR’s Henry Kravis have followed the Sage’s example and built up vast amounts of permanent capital that allows them to invest without raising new funds. The irony is that since the New York-based team jumped on these initiatives, their shares have beaten Berkshire’s. As the guard changes in Omaha, those firms can now overshadow the master.

Blackstone, KKR and their fellow private equity giants once looked very different from Berkshire Hathaway. Schwarzman and Kravis’s firms are deal machines, traditionally using private money and a lot of power to take control of companies and, hopefully, turn them into profits. Conversely, Buffett takes cash from public investors and his insurance businesses, makes both public and private investments in companies, and often holds them for long periods as a passive investor.

But New York asset managers who feel fundraising is under pressure have in recent years looked to something like the Berkshire model to build a more stable war chest. KKR bought insurance company Global Atlantic Financial in June 2020, while Apollo Global Management merged with insurer Athene in 2022. Blackstone raised a real estate fund from small investors with no set maturity date to return capital.

That’s not to say that Buffett hasn’t used his own sterling reputation to score plum deals, just like the Schwarzman crowd. For example, in 2019 he saved a rescue operation Western petroleum boss Vicki Hollub’s ambitious deal for Anadarko Petroleum in exchange for preferred shares that ended up being very lucrative.

But whether it’s Berkshire, Blackstone or any other asset manager, their stock price is a reflection of how good they are at making money from other people’s money. In that sense, those chasing Buffett have actually done better than him lately. The stock returns of Blackstone, KKR and Apollo have been higher than Berkshire’s over the past five years.

Last month, KKR’s co-CEOs compared the direction in which they are moving their company to Berkshire in an interview with Bloomberg. In particular, they highlighted a plan to use their balance sheets to buy and hold companies that throw away dividends, which could then be used to grow. Buffett, meanwhile, was at his company on Saturday annual meeting for the first time without loyal sidekick Charlie Munger, who passed away at the end of last year. While others find success in his model, Berkshire’s future depends on Buffett transferring his expertise – and reputation – to a new guard. Buffett is confident that they are well prepared to take over. However, if they do, they may find that they have already been eclipsed.