Monday, October 29, 2007
Earlier this year, we introduced you to investing legend
Since he started his hedge fund, ESL Investments in 1988, Eddie's averaged 29% a year. He's made billions for his investors, including media mogul David Geffen.
However, to get Eddie to manage your money requires a minimum investment of $20 million. As soon as you hand over your cash, Eddie takes 2% of it away in fees. He also will take 20% of your profits for as long as you invest with him.
I'm not a fan of big fees. So I suggested considering Sears Holdings (SHLD) as an alternative means of getting your money under Eddie's management skills. You see, Eddie Lampert is SHLD's chairman of the board. And many investors speculate that Eddie will use the retailer as a publicly traded hedge fund, much as Warren Buffett used a broke textile company, Berkshire Hathaway.
Lampert hasn't yet turned SHLD into his own Berkshire. So in the meantime, I wanted to tell you about another publicly traded investment with next to no fees that already is a fund with big returns. It's run by another "Oracle of Omaha," Wally Weitz.
Weitz founded Omaha-based Wallace R. Weitz & Company in 1983, with only $10 million. He's since shown investors average annual returns of 15% and grown assets under management to $6 billion.
At this rate of return, Wally has nearly tripled investors' money in the last ten years alone.
Currently, Wally operates as the sole manager of only two funds: the Weitz Hickory Fund and Partners Opportunity III Fund. Of the two, the Partners Opportunity III (WPOPX) has the greatest returns: 10-year average annual gains of 11%.
WPOPX is essentially a hedge fund. It uses leverage (borrowed money) and it also short sells. However, this doesn't mean that Wally takes on big risks with your money. The fund's largest holding – at 9% – is Warren Buffett's Berkshire Hathaway: a cash cow if ever there was one.
WPOPX's top 10 holdings reveal other blue-chip moneymaking machines like American International Group, Wal-Mart, and Fannie Mae.
Besides avoiding big risks, Wally also doesn't charge his investors the usual "two and 20" in fees (2% of assets and 20% of profits). Instead, Wally just charges you 1.1% a year. The returns I cited above (11% a year) are after fees.
And best of all, Wally has most of his liquid net worth tied up in the funds he manages, so you know his interests are aligned with yours.
It's a common trend for investing legends. Warren Buffett, Mohnish Pabrai, and Eddie Lampert all manage most of their net worth themselves. Whenever you consider a mutual fund or investment firm, always make sure the manager has some of his own skin in the game.
Big returns, little risk, and next to no fees... When these kinds of investments are out there, your average hedge fund just can't compare.
U.S. dollar hits low... Euro, Swiss Franc, Swedish Krona, Australian dollar, and Canadian dollar ETFs hit new highs.
Oil touches $92... Petrobras, Royal Dutch Shell, Sasol, BP, CNOOC, and U.S. Oil Fund at all-time highs.
Agriculture boom continues... Agrium, Monsanto, CF Industries, and Mosaic hit all-time highs.