Looking back on Buffett’s hedge fund pick and a Manhattan madam’s industry experience

October 25, 2011   Rob Copeland


AR also revisits the launch of Perella’s water fund.

One year ago

»» Kristin Davis, the infamous Manhattan madam to former New York Gov. Elliott Spitzer, told AR about her background in one of the world’s newest professions. Before being convicted of promoting prostitution, Davis spent nearly a decade doing back office work for now-shuttered Brookhaven Capital Management, Conifer Securities and Hemisphere Management.

Later in life, she added, her escort agency had numerous hedge fund clients. "I spoke with a many of them on the phone when I booked their appointments. I talked shop with them and a few of them offered me jobs at their firms," she said. "I told them they couldn't afford me."

At the time, Davis was running for governor of New York backed by the Anti Prohibition Party, and had a surprisingly serious platform amid such competitors as Jimmy McMillan of The Rent Is Too Damn High party. In the November 2010 election, however, she picked up only 0.5% of the vote, falling short not only of winner Andrew Cuomo, a Democrat, but McMillan and Charles Barron of the Freedom Party.

See also:
Manhattan madam in book stores now

»» Warren Buffett chose Todd Combs, the largely unknown manager of a small Greenwich, Conn., hedge fund, to manage a large chunk of Berkshire Hathaway’s roughly $100 billion investment portfolio.

Combs, 40, had run Castle Point Capital Management, a financials-focused equity fund that was having a difficult year at the time. The $405 million fund was down 3.93% through the end of Sept. 2010, after being up 6.23% in 2009 and down 5.68% in 2008. Buffett said that Combs was not chosen only for his portfolio prowess, but because his low-key personality and value-investment focus was a good fit for the company.

Castle Point immediately announced plans to liquidate. The firm filed its last quarterly 13F form in November 2010. A phone call to its former offices rang unanswered.

Five years ago

»» Perella Weinberg Partners prepared to launch a hedge fund to invest in clean-water technology and infrastructure. The bank hired Rod Parsley, a former McKinsey consultant who previously ran a $50 million water fund at Terrapin Asset Management, to manage the portfolio.

The Perella Weinberg Sustainable Resources fund now manages $200 million, and Parsley remains optimistic on opportunities in the sector. "In the midst of this long-term bullish trade based on finite resources, there is considerable disruption in the form of regulatory and technological changes," he told AR in September. "Governments like to get involved in sectors they view as critical, creating short-term trading and relative-value opportunities based on changes in policy."

Returns have been whipsawed along with the broader market. The fund lost 8.33% in August and 6.66% in September, leaving it down 6.12% for the year, compared with a 5.97% drop for the HFI Global Equity Index.



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