Aug 21 (Reuters) – Here is Warren Buffett’s pension fund
management advice in a nutshell: Be patient, buy only a few
things, ignore the stock market until it becomes irrationally
optimistic, at which point sell.
A recently released 1975 letter from Buffett to Washington
Post owner Katharine Graham on the subject offers new insight
into how early Buffett was to grasp both the difficulties of
pension fund management and the inability of Wall Street to
provide adequate solutions.
Perhaps even more valuable is the way the letter throws
light on Buffett’s approach to value investing. Buffett tries to
act not like a typical fund manager but like a company owner
thinking about buying another company. The crucial ingredients:
patience, to get a good purchase price; courage, to stick with
your investment if the business is doing well but the market
doesn’t agree; and a willingness to sell into a bubble when, as
so often happens, one comes along.
First, let’s talk about Buffett’s letter to Graham. It’s a
nice little story.
When Amazon.com founder Jeff Bezos bought the Washington
Post for $250 million earlier this month, he bought a lot of
problems, but none of them had to do with pension funds. That’s
in large part because the Post was lucky enough to have Buffett
as a board member, investor and adviser for many years, and
smart enough to take his advice. The result: a pension fund with
$1.4 billion in obligations and $2.4 billion in assets.