Buffett Dislikes Most Hedge Fund Managers -- Except His Own
Warren Buffett rarely has good things to say about hedge fund managers, but he makes exception for the two he hired for his holding company. Todd Combs and Tedd Weschler, who managed their own hedge funds before joining Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B), together manage about $21 billion of Berkshire's wealth, but they do it for next to nothing when compared to the traditional hedge fund operation.
Buffett has let details of their compensation plans trickle out over the years, noting at one point each earned as little as $1 million in base compensation plus 10% of the returns they generate in excess of the return of the S&P 500 index. If both were to outperform the market by a percentage point, they could stand to collect $21 million in bonus compensation on an annual basis.
If it sounds like a lot, it is, but their compensation pales in comparison to the prototypical hedge fund model. Hedge funds traditionally operate under the so-called "2-and-20" fee model, in which managers take a 2% management fee on assets plus 20% of returns. Berkshire is effectively paying 0.01-and-10, less than half the typical take of the quintessential hedge fund fee.
Source: Fool.com
