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Warren Buffett Deputy Ted Weschler Makes His Mark

Touted as a future co-CIO of Berkshire Hathaway, former hedge fund manager Weschler enjoys considerable autonomy as an investor.

  • Miles Irish

In June the Glide Foundation’s latest auction for lunch with Warren Buffett netted the San Francisco–based charity $3.4 million. Buffett has also profited handsomely from the annual event: In 2010 and 2011 the highest bidder was Ted Weschler, now one of the billionaire’s two top investment managers at Berkshire Hathaway and a likely inheritor of his portfolio.

Like his boss, Weschler, who joined the Omaha, Nebraska–based holding company in 2012, keeps a low profile. He took the job on the condition that he could commute midweek to Berkshire headquarters from his home in Charlottesville, Virginia.

A marathoner who remarkably has skipped just one day of running in the past 36 years, Weschler takes a patient, disciplined approach to investing. He honed his skills at Peninsula Capital Advisors, the hedge fund firm he launched in 2000 above a bookstore in a Charlottesville mall. Peninsula’s $2 billion fund returned 1,236 percent before he shuttered it in 2011, versus 146 percent for Berkshire during the same period.

Known to do exhaustive research before deciding to allocate to a company, Weschler tells Institutional Investor that Buffett has always been a role model. But when it comes to his portion of the Berkshire portfolio, he says, he hardly ever discusses specific ideas with fellow investment manager Todd Combs or the Oracle of Omaha; in an effort to avoid the consistently mediocre returns that Buffett believes are produced by committees, each has full discretion over his own investments.

Weschler, 55, is no stranger to this dynamic; he used a similar system at Peninsula, but he admits that it isn’t the most conventional strategy. Forced to play his own devil’s advocate, he says, he’s a bear on a given stock one morning and a bull the next. “Then I figure out which Ted carries the day,” he explains.

“One of Ted Weschler’s distinctive contributions to Berkshire Hathaway is, I believe, his sophisticated capacity to handle restructurings, reorganizations, transactions, mergers, acquisitions, et cetera,” says Thomas Russo, managing member of $11 billion registered investment adviser Gardner Russo & Gardner. By contrast, many other investors in public equities merely traffic in the stocks of well-organized companies, contends Russo, whose Lancaster, Pennsylvania–based firm holds almost $1 billion worth of Berkshire shares.

As a longtime fan of dialysis provider DaVita Healthcare Partners (a former Peninsula holding), Weschler undoubtedly helped to steer Buffett into a $3 billion stake in the Denver-based company. “I have done a lot of health care investing over the years,” the Erie, Pennsylvania, native says. “It’s curious — as big as Berkshire is and as big as health care is, it is a very small percentage of Berkshire.”

Weschler, who holds an economics degree from the Wharton School of the University of Pennsylvania, has also been a key player in Berkshire’s first foray into European acquisitions, with an emphasis on Germany. Last year he oversaw the $452 million takeover of Detlev Louis Motorradvertriebs, a Hamburg-based retailer of motorcycling apparel and accessories. “We’d love to do more deals like this,” says Weschler, who is now the company’s chair.

In addition to the favorable German regulatory framework cited by Buffett, he points to the nation’s strong Mittelstand — nearly all of its businesses are either small or medium-size — as fertile ground for new takeovers. Detlev Louis and many of its peers are well-managed, family-owned companies that welcome being acquired by a corporation like Berkshire.

As Weschler sees it, both parties benefit: Berkshire buys an attractive business for a fair price in return for helping it to avoid the aggressive layoffs and restructurings that often come with a private equity or strategic acquisition deal. Given the choice between getting top dollar from a firm interested primarily in short-term profits or selling to an entity committed to run their company for the long term while maintaining the brand’s integrity, many entrepreneurs will opt for the latter without hesitation, he says.

In his investor letter for 2013, Buffett praised Weschler and Combs for outperforming his stock picks for the year “by a lot”; hiring them “was one of my best moves,” he said in his 2015 letter. Putting his money where his mouth is, Buffett has given the pair more freedom: Each now controls $9 billion of the Berkshire portfolio.

Buffett and Berkshire vice chair Charles Munger will be 86 and 93, respectively, when the firm’s next shareholder meeting takes place in May 2017, so investors are rightfully uneasy about the future of the business. Most observers believe that when Buffett leaves, Weschler will become co-CIO alongside Combs. (Ajit Jain, president of Berkshire’s insurance group, is favored to take over as CEO.)

“The challenge for Ted and anyone else following in the footsteps of Warren is not besting the past performance of Warren but the size of the capital base,” says Tampa, Florida–based author and Buffett expert Robert Miles. “With over $70 million per day flowing into Omaha to allocate, it is difficult to outperform.”

For his part, money manager Russo thinks that “the No. 1 thing that will keep Berkshire Hathaway going is their reputation as a place where you can sell your business and keep your leadership intact.”

Weschler is pragmatic but confident about the challenges ahead, stressing Buffett’s role as a teacher who has imbued Berkshire with “a culture that will live well beyond a man.” Speaking personally, he adds, “I’ve always lived and breathed capital allocation, so the fact that the numbers are bigger does not bother me that much — other than the fact that it does make it harder to beat the market.”

Weschler hopes that Buffett isn’t leaving anytime soon, not least so he can keep enjoying weekly lunches with the man from whom he has learned so much. “I get to average down my cost,” he jokes.