Berkshire's Potential Heir Revealed: Little-Known HF Manager Todd Combs

Warren Buffett has named 39-year-old Todd Combs, a small hedge fund manager, to oversee a portion of Berkshire's roughly $53 billion equity portfolio.

(October 26, 2010) — In a surprising move, relatively unknown Todd Combs has been selected to help oversee a portion of Berkshire’s roughly $53 billion equity portfolio.

“For three years Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s investment portfolio. We are delighted that Todd will be joining us,” Berkshire’s CEO Warren Buffett commented in a statement. With the issuance of Berkshire’s announcement, Combs issued a letter to the limited partners of Castle Point Capital announcing his decision to join Berkshire.

Buffett is reportedly searching for candidates to take over his duties when he leaves his post, and has said his responsibilities will be divided among at least three people upon his death or retirement. He has said his son, Howard Buffett, would be an effective non-executive chairman. The big question now is whether he will give the reins to Combs to oversee the entirety of Berkshire.

Buffett’s hiring of the relatively unknown hedge fund manager is unexpected — during the past month, as speculation swirled as to who would assume the top job as the next chief investment officer of Berkshire, Combs did not appear as a likely candidate.

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Some background on Buffett’s potential successor: Combs, of the $400 million Castle Point Capital Master Fund, profited from large gains during 2007 and 2008 by shorting financial stocks, specifically shares of mortgage giant Fannie Mae and reinsurer RenaissanceRe Holdings — a reflection of his success in financial services stocks while limiting risk. While the fund has earned cumulative returns of about 34% since it launched, the S&P 500 index fell 5.1% over the same period.

Combs lives in Darien, Connecticut, grew up in Florida and graduated from Florida State University in 1993 with a major in finance. He moved onto a job with the Florida’s comptroller’s office and from there worked at Progressive, the car insurance company. In 2005, Combs took a leap and decided to branch out on his own to start Castle Point Capital. “His fund has performed well. He is a very good guy and we are sorry to lose him, but we are very proud of what he has become, and it is a real tribute to him that he is being hired by Berkshire,” Chuck Davis, a seed investor for Castle Point, told the Financial Times.

(October 26, 2010) — Pittsburgh Mayor Luke Ravenstahl has told the City Council that its plan for the city’s parking assets will be a failure, claiming that the Council-Controller strategy to save the city’s pension fund from a state takeover is faulty with numbers that don’t add up.

“We had 19 public meetings and discussion of a bond concept was at each single public meeting,” Councilwoman Natalia Rudiak said, according to KDKA, a Pittsburgh CBS affiliate. “We had a discussion of the bond concept as well as the state’s takeover using the numbers that we had scraped together.”

City Councilman Patrick Dowd explained that the transition proposed by the council makes sense to the Parking Authority. “We’re not dictating, we’re not demanding, we’re not manipulating, we’re asking them because we have confidence,” he said, as reported by KDKA. “We have total confidence and I’ve asked why the mayor doesn’t have confidence. Why is he afraid? What’s he afraid of the independent analysis?”

Despite the confidence of council members over their plan — crafted by some members with city Controller Michael Lamb — Ravanstahl has remained adamant that the strategy will result in layoffs and higher taxes, burdening the city with between $600 million and $800 million of debt. Previously, the major championed a plan in which the city would lease garages and metered spaces for 50 years for $451.7 million to a private investment group formed by J.P. Morgan and Connecticut-based LAZ Parking. The mayor had hoped to use some of the money created by his plan to pay off the parking authority’s debt and pump more than $200 million into the city’s pension fund to avoid a state takeover by January 1.

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The Council rejected the mayor’s plan and instead proposed it would sell Mellon Square garage, five parking lots and nearly 7,000 metered spaces to the Parking Authority to raise the $220 million the pension funds need, the Pittsburgh Tribune-Review reported.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742