The Oracle of Omaha

Berkshire Hathaway has had another good year, growing by 23% in 2017. However, Chairman Warren Buffet acknowledges that almost half of that gain was delivered by the US corporate tax cut. In his much-vaunted annual letter to shareholders, the investment doyenne points to a steamy market with a lack of sensibly-priced deals, driven by an abundance of cheap debt and hubristic behaviour by CEOs. Buffet’s 10-year bet with Protégé Partners that a passive investment in the S&P 500 would outperform five fund-of-funds has crystallised in his favour – and by quite some margin. However, he states that the real findings from this exercise were that: (1) for long-term investors (e.g. pension funds) buying bonds to decrease risk is a ‘terrible mistake’ – at super-low yields, a bond-heavy portfolio only increases the risk that target returns will not be achieved, and (2) ‘stick with big, easy decisions and eschew activity’.