Billionaire Warren Buffett is betting that his deputy investment managers can find value hiding in a corner of Berkshire Hathaway Inc.: its $10.4 billion in pension assets.
Todd Combs and Ted Weschler have been building stock portfolios with funds they oversee for defined benefit plans at Berkshire subsidiaries, including railroad Burlington Northern Santa Fe. The strategy saves Mr. Buffett's company fees it would pay to outside asset managers and could reduce the need for contributions to the pensions.
“For his whole career, Buffett has been extremely choosy about who he will allow to manage Berkshire's money,” said James Armstrong, president at Henry H. Armstrong Associates, which oversees about $400 million, including shares in the Omaha, Neb.-based company. “Now he's got two young guys who have a lot of energy and some capacity, and I think it makes perfect sense” that he selected them for pension investments rather than “some big bank.”
Burlington Northern liquidated hundreds of holdings backing obligations to retirees as Berkshire took control of investments for a $1.9 billion defined-benefit plan in 2012, two years after Mr. Buffett bought the railroad, U.S. Department of Labor filings show. Since then, the fund made concentrated stock bets in companies favored by Mssrs. Combs and Weschler.
Holdings of DirecTV and DaVita HealthCare Partners Inc., for instance, were each valued at more than $300 million at Wednesday's share prices, based on assets listed in regulatory filings in May. Stock picks in the plan used to be a fraction of that size, separate filings show.