Fund managers’ goal: Mimic Buffett
Is it possible to copy Warren Buffett's investment strategy and package it in a mutual fund?
The folks at AQR Capital Management, a firm that runs 16 mutual funds, recently published a paper saying they had created a systematic process that picks stocks like Buffett. The paper says that the process outperformed the returns of Buffett's Berkshire Hathaway (BRK.B +0.35%, news) (with the benefit of hindsight) from 1976 to 2011.The Greenwich, Conn., firm declined to comment on whether it plans to roll out a mutual fund based on its Buffett simulator.
In Britain, meanwhile, an investment company has created a fund that it says follows Buffett's investing principles. The year-old fund's manager, Keith Ashworth-Lord, is trying to figure Buffett out. "I'm the apprentice and he's the sorcerer," Ashworth-Lord says.
The actively managed fund, ConBrio Sanford Deland UK Buffettology, from Sanford DeLand Asset Management, scours the U.K. market for the sorts of value stocks it thinks would excite Buffett. Recent buys include Domino's Pizza Group (DPUKF 0.00%, news), a U.K. company that operates Domino's (DPZ -0.29%, news) outlets in England and some European countries, and liquor company Diageo (DEO +1.50%, news).
It's one of a long line of funds that have purported to emulate the Berkshire Hathaway founder, who is widely considered one of the best investors in modern times, and who didn't return a request for comment.
Robert G. Hagstrom, the author of several books on Buffett, in 1994 launched a fund dedicated to investing like him.Legg Mason (LM +2.43%, news) bought the operation in 1998. The fund, now called Legg Mason Capital Management Global Growth Trust (LMGTX +0.36%, news), trailed both its peer funds and the Standard & Poor's 500 Index ($INX +0.78%) in recent years. Earlier this year, the company ditched the fund's explicitly Buffett-like investment approach and Hagstrom stepped down as the fund's manager.
A Legg Mason spokesman says the company doesn't comment on "changes to portfolio construction." Hagstrom also declined to comment.
Some say many of the crucial drivers of Buffett's success are impossible to replicate in a fund.
Samuel Lee, an exchange-traded-fund analyst atMorningstar (MORN +0.50%, news), says it's hard for a fund to imitate Buffett's ways because investors may reject a fund that holds staid stocks even in upswings. And unlike Berkshire Hathaway, he says, a fund won't have income from insurance companies like Geico to provide leverage for investments, possibly magnifying returns.
Lee says the no-frills Vanguard Dividend Appreciation ETF (VIG +0.99%, news) -- which also has mutual-fund shares -- comes closest to a Buffett-like strategy. It perennially has some of the same top holdings as Berkshire Hathaway and is similarly focused on companies with a long history of raising dividends, Lee says.
While the UK Buffettology fund remains tiny, with about £2.5 million ($4.1 million) invested, it has returned 29% this year through Oct. 31, compared with 6.1% for its benchmark, the FTSE All Share Index.
The fund manager, Ashworth-Lord, says he follows Buffett closely in the news and bases himself far from the heart of the investing crowd, just as Buffett does. "I work out of Manchester, not in London. It's like how he works in Omaha, (Neb.), not on Wall Street. You're not bombarded by information," he says. He has an Internet news alert set for "Warren Buffett," and he reads the Omaha World-Herald on the Web to try to keep up with Buffett.
Ashworth-Lord licensed the "Buffettology" term from Mary Buffett, who was once married to one of Warren Buffett's sons, and from her business partner David Clark. Though Mary Buffett and the Berkshire founder no longer speak, she has co-written books on his investing style.
Mary Buffett says it's a great time for value investing in the U.K., where anxieties over the European Union's troubles have driven down prices of solid stocks. Still, she concedes, "there's nothing like a Berkshire Hathaway -- which is almost like a fund itself, it's so large."
I'm horrified at the notion, but what using the Olympics beginning and all, I suspect several of you might have missed this story when it ran last weekend.
So, I wanted to offer you another shot at it, given that I believe it's mildly intriguing. It goes to the heart in the state's efforts to boost job placements among people coming towards the workforce technique for help. But as you are going to read (I mean, you do plan on reading it, proper?), the state's technique isn't exactly watertight
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It basically determines who has contact using a workforce office, then keeps track of who gets a job inside six months. Then it draws a straight line connecting the two.
"You had make contact with with a single of our regional workforce boards, you got a job inside six months, ergo, the workforce method helped place you within a job."
The approach -- which can be consistent with federal regulations -- basically errors correlation for causation. The reality is, the state can not actually say -- and to become fair, it could be logistically tough to accomplish so -- who got a job because of their contact with a single from the workforce agencies.
Anyway, here's the leading in the story. You are able to read more at the link.
The news release final week hit each of the proper notes to get a governor who has staked his reputation on job creation.
Florida was heading in the "right direction," it stated, thanks, in part, to a state work-force system that has helped practically 180,000 people discover jobs given that January.
Gov. Rick Scott hailed the placements as "new economic opportunities" for each workers and businesses. His top jobs official stated the numbers "demonstrate the worth Florida's workforce technique delivers in supporting financial recovery and development."
But the calculations are based on a system that allows the state to claim credit for job placements even when clientele have only glancing contact with any from the state's 24 regional Workforce Florida boards.
They may well just use a fax machine at a local Workforce office, or, right after applying for unemployment, assessment job openings on a state web site. If they locate work within six months of their get in touch with having a neighborhood jobs agency, they are able to be counted as a placement.
To get credit for the placement, there's no requirement that the agency must have supplied meaningful aid that bring about the job - in fact, historically several people who registered with their nearby Workforce agency didn't use any of its solutions. At Workforce Central Florida, that figure approached 40 percent, according to the agency's previous president.
"There is no requirement for individual assistance" to be counted as a placement, a spokesman with the state's Department of Financial Chance said final week. "Direct service" from the regional jobs board "is not required."