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Buffett was pretty consistent in producing returns for his partners. But the person he recommended as a first-class fund manager, Bill Ruane, had shown a 50% fall in his client’s funds in 1962. In 1963 he only just broke even.
In the nine months to October 1969, when Buffett recommends Ruane in a letter to Partners, he had lost about 15%.
I find this little piece of investing history very encouraging. Buffett still regarded him as the best, despite short-term under-performance.
Yes, one year is short-term in the investing game!
So, the key question is why? What was Buffett looking at when he judged him to be excellent?
Well, first of all there is the overall performance. Between 1956 and 1961 and from 1964-1968, the return on a composite of his individual accounts averaged over 40% per annum.
This is better than Buffett had achieved (I’ll write a Newsletter showing Buffett’s performance soon – for now take it to be an average of around 30%).
More important was the soundness of the principles he followed. Mr Market will occasionally push your portfolio down dramatically even when you are an excellent investor, but you will bounce back if you hold fast to sound investing principles.
Bill Ruane
Ruane graduated from Harvard Business School in 1949. From there he followed the well-trodden path of Ivy-leaguers to Wall Street.
But then, as Buffett puts it in his great talk, The Superinvestors at Graham-and-Doddsville (given at Columbia University, 1984) “ he realised that he needed to get a real business education so he came up to take Ben’s [Graham]course at Columbia.”
This is where the 21-year old Warren met Bill in 1951.
Warren knew Bill’s intellectual origins. Ruane was a true investor.
He “ranks the highest when combining the factors of integrity, ability and continued availability to all partners.” (Buffett’s letter to partners October 9th, 1969).
In the letter he continues appraising his personality: “I have had considerable opportunity to observe his qualities of character, temperament and intellect since that time. If Susie and I were to die while our children are minors, he is one of three trustees who have carte blanche on investment matters – the other two are not available for continuous investment management for all partners, large or small.”
A logical caveat
Buffett is so rational and so honest that he will not…………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1.
