Warren Buffett’s hiring of a relatively unknown hedge fund manager, Todd Combs, to help oversee Berkshire Hathaway’s overall portfolio came as a surprise to many. In the past month, speculation ran high as to who would take the top job as next investment chief at Berkshire, and Combs' name was not prominently on the list of likely candidates. Still, upon closer look, one can see how this announcement might be understandable.
While Berkshire is a broadly diversified company with investments in many sectors of the economy, the financial sector continues to be a significant part of the overall investment portfolio. General Re,Geico, and Berkshire Hatahway Assurance spin off huge cash flow that provides for opportunities for other investment ideas. XTRA Lease and investments in Goldman Sachs again underscore the focus on financial services. Enter Todd Combs.
With a background analyzing financial services companies, Mr. Combs likely understands the nuances of the financial industry. While the fund he ran may only have about $400 million in assets, it’s primarily invested in the shares of financial-services companies. That expertise will be well suited to assessing Berkshire's financial assets.