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Berkshire Portfolio Managers Weschler and Combs Bonuses to Exceed $50 Million for 2012

April 29, 2013 | About:
Canadian Value

Canadian Value

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A profile from The Omaha World-Herald of how Weschler and Combs ended up managing money for Warren Buffett:

Warren Buffett's decision to hire two investment lieutenants is paying off for Berkshire Hathaway, and it's paying off for the two younger money managers, too.

Todd Combs, 42, and Ted Weschler, 51, are expected to receive bonuses exceeding $50 million each based on their investment results in 2012, evidence that they and Buffett made the right choices when they connected.

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Combs and Weschler discussed how they came to work for Buffett in interviews for a new World-Herald book, “The Oracle & Omaha: How Warren Buffett and His Hometown Shaped Each Other.”

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Weschler and Combs had admired Buffett long before meeting him, and both actively sought connections that led to their hiring.

Also in an interview for the book, Buffett said hiring Combs and Weschler happened because of “a lot of good luck.”

“Like Woody Allen said, 95 percent of it is just showing up,” he said. “That's what's happened with Berkshire. That's happened with the people. And once you get 'em, you've got 'em for decades to come.

“And people do want to join us.”

Buffett hired Combs in 2010 and Weschler in 2011 as part of Berkshire's succession plan, which calls for splitting his job into three parts: a non-executive chairman; a CEO to handle acquisitions and the care of executives who run Berkshire-owned businesses; and a small group to invest Berkshire's money.

Today, Combs and Weschler each manage about $5 billion out of Berkshire Hathaway's $88 billion in investments.

Their pay package is no surprise. Both were high-income investment managers on their own before joining Berkshire.

Buffett has said they would be paid salaries of about 0.1 percent of the money they manage, which would be $5 million a year based on a $5 billion portfolio. They also receive “performance pay” of 10 percent of the amount their investments grow beyond gains by the Standard & Poor's index of 500 publicly traded stocks averaged over several years.

In his latest report to shareholders, Buffett said investments by Weschler and Combs in 2012 were more than 10 percentage points higher than the 16 percent returns by the S&P 500. “They left me in the dust as well,” Buffett wrote.

If each managed $5 billion and had 26 percent returns, their performance pay would be $50 million, with one-third paid in 2013, one-third in 2014 and one-third in 2015. Part of their pay also depends on the other's investing success.

That kind of compensation wasn't on Combs' radar when he first saw Buffett in person. He was among 165 students in a Columbia University investing class.

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