Bill Gates (Trades, Portfolio) is best known as the founder of Microsoft (MSFT, Financial), although he has been building his profile as a philanthropist in recent years. His charitable foundation is one of the largest globally, and its activities are supported by a massive $23 billion investment portfolio.
This investment portfolio gives us an interesting insight into Gates' mind, not just as a business owner but also as an investor. The trust's portfolio is managed by its investment committee, which Vidya Vasu-Devan chairs. As such, I think it would be a mistake to say that this accurately reflects the Microsoft founder's investment ideas. However, looking through the holdings, I get the impression that Gates does have a high level of influence over the foundation's portfolio. What's more, we can always learn a lot from the way a high-performing portfolio is managed.
Top holdings
According to the foundation's latest 13F report, which details the holdings at the end of September 2021, the largest holding in the equity portfolio was Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) (as a reminder, 13Fs only detail U.S.-listed common stock positions). This holding accounted for 46% of the portfolio.
Berkshire is designed to protect and grow its investors' capital. Leaving aside the fact that Gates is a long-time friend of Berkshire's Warren Buffett (Trades, Portfolio), as well as the many Berkshire shares that Buffett has donated to the Gates Foundation's portfolio, the firm's investment goals are just what one might be looking for managing the portfolio of a foundation.
The managers do not want to risk capital, but they are looking for steady returns. Berkshire meets these objectives. It is also notable that this has been a significant position for the portfolio since records began, making the foundation the sort of long-term, focused investor Buffett has always wanted to see owning shares in the conglomerate.
The second and third-largest holdings in the portfolio are also long-term holdings. Waste Management Inc. (WM, Financial) is the second-largest holding. Accounting for 12% of the portfolio at the end of September, it has been part of the portfolio for nearly two decades. Caterpillar Inc. (CAT, Financial) has been in the portfolio for a similar length of time, and it currently accounts for 8% of the portfolio.
Rounding out the top five, we have Canadian Natl Railway Co. (CNI, Financial), which makes up 7% of the portfolio, and Walmart Inc. (WMT, Financial) with 4%. Both of these have been in the portfolio for around two decades.
Building wealth
It seems likely that Gates and his portfolio managers have built their investment strategy around Buffett's style. I am sure the Oracle of Omaha has tried to impact the importance of long-term investing on his close friend, especially during the years he served as a trustee to the Gates Foundation before stepping down in mid-2021.
Indeed, it is notable that excluding Berkshire, all of the top holdings in the foundation's portfolio are top-of-the-industry brands with substantial competitive advantages and global footprints.
It looks to me as if Gates and his team have set out to find companies that can stand the test of time - companies they can buy and hold in the portfolio without having to worry about their prospects. This means they can focus on the business of charity without having to get bogged down in expensive legal battles, investment analysis or trading activities.
This approach could be quite helpful for some investors. In many respects, individual investors should be trying to manage their finances in the same way as the portfolio managers of the Gates Foundation manage their portfolio. They should be trying to build wealth and reduce the risk of loss by focusing on high-quality companies and holding them for a very, very long time.
As such, the investment activities of this foundation may be more relevant to the average investor than a hedge fund or other high-profile investors. If it has worked for the Gates Foundation, it can work for everyday investors who want to avoid risk as well.
