If you’re one of the thousands of investors around Australia who have tried to replicate the investment style of Warren Buffett, then a Sydney-based financial services company might have just the product you’ve been looking for.
JB Global, which is run by former Macquarie banker Justin Beeton, has launched a special product that will allow investors to leverage into Buffett’s investment company, Berkshire Hathaway.
While Class A shares in Berkshire Hathaway trade for more than $US100,000, a stock split involving the company’s Class B shares mean they now trade for $US75.
JB, which is looking to raise $40 million for the product, will invest in these Class B shares via over-the-counter options.
Investors can borrow 100% of their investment via a 4.95% for three years ($7,500 in interest must be prepaid and the minimum investment is $50,000) and annual contingent coupons on the three-year investment in the fund will pay a up to 7.2% depending on the performance of Berkshire’s call options in a given year.
Beeton argues that the fund provides an opportunity for investors to buy into Berkshire without the currency risks that a direct investment in the company from Australia would normally carry.
Berkshire Hathaway shares have developed a cult-like status in the last few decades, thanks to the incredible returns Buffett has generated over more than 44 years. The company owns a large portfolio of US shares, including stakes in American Express, Coca-Cola and General Electric, plus a swag of privately run businesses spanning the energy, manufacturing and transport sectors.
However, gaining access to Buffett’s Berkshire has become increasingly difficult in recent years, with Buffett hype pushing the price of the Class A shares well beyond the reach of most retail investors. However, a share split of the Class B shares has created much more liquidity in the stock and allowed companies like JB Global to offer ways for retailer investors to get a piece of the Oracle of Omaha.
Beeton expects strong interest.
“A lot of fund managers have tried to replicate Buffett’s investment philosophy, but in my view why replicate it when you can just but the stock,” Beeton told the Australian Financial Review.
“Fund managers don’t want to do that because it will make them redundant.”
Investors will pay a 1% up-front fee and performance fees of 10%.
Of course, investors willing to go into the fund will be looking for something of a return to form Berkshire Hathaway in 2010 and the next few years. The stock rose 2.7% in 2009, less than the 23% return in the Standard & Poor’s 500 Index.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
