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Buffett to stage $5bn shoot-out to find heir

By Francesco Guerrera in Omaha

Published: May 6 2007 13:40 | Last updated: May 6 2007 18:31

Warren Buffett wants to hire up to four senior investment managers, give them as much as $5bn each and see how they perform in a financial shoot-out to pick his successor as investment chief of Berkshire Hathaway.

Speaking to 27,000 investors gathered in his native Omaha for Berkshire’s annual meeting on Saturday, the world’s second-richest man said he had received more than 600 applications since beginning the search for a chief investment officer in February.

“We are looking for one or more. I don’t think it’s impossible we could find three or four and … give them a chunk of money – $2bn, $3bn, $5bn – and have them manage it for some time,” he said in a six-hour session of questions and answers.

The “Sage of Omaha” has said repeatedly he is in fine health and does not want to retire.

However, uncertainty over who will succeed the 76-year-old investor upon his death has weighed on the share price of Berkshire, a US insurance-to-clothing conglomerate built by Mr Buffett’s clever deal-making.

Mr Buffett, Berkshire’s chief executive and chief investment officer, wants the next generation of leaders to split the roles. He has said he has three, unnamed, internal candidates for the chief executive position.

During the meeting, Mr Buffett repeated warnings about the use of leverage and derivatives and criticised the “electronic herd” of hedge fund managers, saying their fast trades in and out of assets were a “fool’s game”.

However, he said the crisis in the US subprime market, which he called “dumb lending and dumb borrowing”, was unlikely to spread to the rest of the economy.

Asked about the US newspaper industry, Mr Buffett indirectly defended the dual-share structure used by the Bancroft family to control Dow Jones, the media group under siege by Rupert Murdoch’s News Corporation.

Talking about a similar scheme at The New York Times, he said: “The woes of the newspaper business are not connected with the difference in holding structure at the Times or other places … The newspaper business has just got a lot tougher.”

He also warned that American companies’ current era of unprecedented profit growth and benign economic conditions could be brought to an abrupt end by growing political and financial risks.

“Corporate America is living in the best of all worlds, and history has shown that those conditions don’t persist indefinitely,” he said.

Noting that corporate profits’ share of gross domestic product is hovering near record levels while labour’s portion of GDP has declined, he said Congress might raise corporate taxes to redress the balance.

During the meeting, Mr Buffett was forced to rebuff criticism of some investments and charitable donations.

When an investor and father of five attacked his donations to a pro-abortion organization, Mr Buffett replied: “I really think it’s too bad that for millennia women in the US and around the world, women have had babies forced on them by governments run by men,” he said to general applause.

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