Warren Buffett picks another little-known successor

NEW YORK/BOSTON Mon Sep 12, 2011 3:11pm EDT

NEW YORK/BOSTON (Reuters) - Warren Buffett advanced his succession plan on Monday by naming Ted Weschler, a low-profile hedge fund manager who has produced out-sized returns in the last decade, to help manage the investments of Berkshire Hathaway Inc.

Weschler, 50, will start at the company early next year and work with Todd Combs, who joined Berkshire last year, to manage its equity portfolios. Buffett, 81, has said he may also bring in a third manager, but meanwhile he continues to oversee the lion's share of the company's $52.36 billion in U.S. equities.

Weschler, like Combs before him, has succeeded while keeping a low profile far from the canyons of Wall Street.

The Charlottesville, Virginia-based money manager delivered total gains of 1,236 percent over the last 11 years, according to investors. Over the same period, Berkshire's own Class B shares have risen 84 percent and the S&P 500 index has fallen nearly 23 percent.

As of June 30, Weschler's Peninsula Capital Advisors had long positions in about $2 billion worth of stock, according to regulatory filings. Combs was managing about $400 million when he was hired.

Combs and Weschler appear to have different strengths, with Combs having focused more on financial stocks while Weschler appears to have favored communications-related picks. Bringing them together may work well, according to some experts.

"It seems they might complement one another," said David Kass, a professor of finance at the University of Maryland who has studied Buffett and his work. "Weschler will bring diversification and expertise outside of the financial sector to Berkshire Hathaway."

Since Combs started with Berkshire, Buffett has made clear there would be more people added to the investment team to eventually replace him. When and how many, however, have been open questions that have weighed on Berkshire's stock, analysts following the stock have said. Some investors say Berkshire shares are currently at their most undervalued level in a generation.

A number of Buffett's best-known biographers, as well as prominent fund managers including Mario Gabelli, told Reuters Insider they were not familiar with Weschler or his work. The same was true when Combs was appointed last year.

Moments after one of the biggest personnel mysteries in finance was lifted and Weschler was named as one of a likely trio of heirs to Buffett as managers of Berkshire's investment portfolio, Weschler kept to his usual routine. He was at his desk at Peninsula -- the hedge fund he founded in Charlottesville, Virginia, in 1999 -- dialing investors, his receptionist said.

SECRET LUNCHES

Weschler's interest in Buffett, who is both chief executive of the ice-cream-to-insurance conglomerate and its money manager, has been growing for some time.

According to journalist Carol Loomis, a long-time friend of and ghost-writer for Buffett, Weschler paid millions of dollars to dine with the "Oracle of Omaha" twice in the last two years.

Unlike many who bid in the annual charity auction of the lunch with Buffett -- to benefit the anti-poverty group Glide -- Weschler insisted on anonymity, wanting his name kept out of the headlines and requesting a change of venue from the New York steakhouse where the lunch is usually held. Weschler, who bid $2.63 million for the 2011 lunch, met Buffett on his home turf in Omaha.

In recent years, pressure has mounted on Buffett to put a succession plan in place for the day he will no longer run the company. Buffett's roles of chief executive and investment manager will be split after he retires; the names on the CEO succession list are secret.

Weschler has overseen a very concentrated portfolio with DirecTV, DaVita, which runs kidney dialysis centers, and Liberty Media ranking among his biggest and most recent holdings.

In total, he held fewer than a dozen publicly traded U.S. stocks at the end of the second quarter, according to his most recent regulatory filing. He is not required to list stocks he may be shorting or otherwise betting against.

Weschler earned an undergraduate degree in economics from the Wharton School at the University of Pennsylvania, where Buffett began his own undergraduate education decades ago.

Before starting his stock-picking career in Virginia, Weschler worked at specialty chemicals and materials company W.R. Grace, where at one time he was assistant to the vice chairman.

The path for Weschler to join Berkshire was laid at this year's lunch when Buffett pitched the idea of a move to Omaha, Buffett told Loomis. "I very much wanted him to do it, but I didn't expect to get very far with the idea," Buffett said.

"Ted will no doubt make a lot of money at Berkshire. But he was already making a lot of money with his fund -- you can get an idea of that from the size of his (charity) bids -- so money wasn't a reason for him to come."

In Charlottesville, a city one-quarter the size of Omaha, Weschler and his wife have supported a number of charities, from helping sponsor a youth film festival to donating to one that builds structures for communities in need.

(Reporting by Ben Berkowitz and Svea Herbst-Bayliss, editing by Steve Orlofsky, Matthew Lewis and John Wallace)

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