slkiel

We'd love to see those in Omaha at our investor day event immediately after the Saturday meeting. Arquitos Capital, Alluvial Fund, Ironwood Fund, and Bonhoeffer Fund will be presenting. Feel free to stop by, even if just for a few minutes. Additional details below: May 5, 2018, 4pm-6pm local time Hilton Hotel, Murray Conference Room (second floor)— 1001 Cass St., Omaha, NE 68102 https://medium.com/@WOAM/investor-day-presentation-may-5-2018-28b71e38ca3a

I think the idea was that it was a picture of the Empire State Building. Keith works at Empire Valuation and the name of the street for the fund is Empire. That being said, the website and presentation materials are currently being worked on, but we wanted to get a placeholder up there for the website.

Keith- It would be interesting if you would share the meaning behind choosing the Bonhoeffer name when you get the chance. We are excited about the launch and look forward to a great partnership. Many thanks to Keith, Rodney Lake, Mike Bridge, and Todd Peters for making this a reality.

Short answer: Yes

Depends on the state. Definitely consult an attorney experienced in the field before you get going, or talk to RIA in a BOX. There is much more to getting started than meets the eye. Generally, though, you will have to register as an RIA or you will be limited on what type of investors you can accept. If you are planning on accepting any friends and family, then in nearly all cases you will have to register as an RIA, with the primary exception to mention being NY state.

Remember that the regulatory environment is much different now compared to Buffett's time as well. You may not charge performance fees in most states if your limited partner is not a qualified client (higher standard than accredited investor). That means that if you do a 0/25 and you accept friends and family money and your friends and family are not HNW individuals, you will not be making any money at all no matter your performance.

Just in case Buffett does mention the pink tutu thing, I think we should be prepared. These are on sale at Berkshire-owned Oriental Trading, though my quick search only turned up child-size: http://www.orientaltrading.com/child-pink-tutu-a2-13616945-12-1.fltr?Ntt=tutus

I read this a few days ago and really identified with it: Some Thoughts on Becoming an Independent Fund Manager, http://www.rvcapital.ch/pdfs/Some_Thoughts_on_Becoming_an_Independent_Fund_Manager.pdf I'd excerpt parts of it, but all of it is great. Highly recommend reading it if you have a small fund or if you're thinking of starting a fund.

BAC B warrants

I think the smartest way to do it is the way Pabrai did (and Buffett for that matter). He made a bunch of money personally in the market over several years, and then was able to start with a decent amount because of that. It seems like people came to Pabrai. The problem with starting very small (and I'm one of those that did), is that you are desperate to raise money in the beginning. You need to be careful that that doesn't affect your portfolio management decisions. You also don't want to spend too much of your time trying to raise money, when you should be doing research. Even if you're young, if you're really as good as you think you are, you should be able to grow your own money to a few hundred thousand. You may need to really scrimp and save to start though. At that point, you should be able to get started and there would likely be some friends and family that would know about you and kick in something as well, even if as small as $10k. Once you get going, as long as perform, random acquaintances will get interested. You just need to keep putting yourself out there. I think for most of us who have funds, it took longer than we expected. But, if you perform, you'll make it eventually if you are committed and your funds will mushroom at some point. You'll also learn more in your first year running the fund than you would have ever expected.

All qualified clients are accredited investors.

This is what I didn't fully understand until I started the fund. You are right about the accredited investor requirements. However, in order to charge performance fees, the LP has to also be a qualified client with the minimum asset requirements that I listed. So, for example, I have 10 investors. Three of them are qualified clients (assets of at least $2m or at least $1m in the fund). I can charge them performance/incentive fees. Eight of them are accredited investors. As a 3©1 fund I can have up to 35 non-accredited investors in the fund, so no problem on the two who are not accredited (other than higher liability potential from them). But, I cannot charge performance fees to the seven investors who are not qualified clients. The qualified client levels for sub $100m (I believe) funds are defined by the state rules, which are different across states. However, there is a model law movement to revise the standards in the states to match the SEC definition. Many states have done this already, and others are following suit. For all the states I've looked at who have not adopted the $2m threshold, they still have an old $1.5m level. For 3©(7) funds, I believe all of the LPs must be qualified clients.

As much as I like the Pabrai/Buffett incentive fee structure, there is a big piece unmentioned that makes it unworkable for small funds raising money from friends and family. In fact I did not even realize this when I started my fund in 2012. In order to charge performance fees in the U.S., a limited partner must be a qualified client. States have different rules on what asset size they must meet, but more states are adopting the new federal standard, which is $2 million not counting the value of the primary residence, or $1 million invested in the fund. This can be a huge problem if you choose to not take a management fee. For example, I currently have 10 limited partners, but only three of them are qualified clients. This was a problem (for the general partner, at least) that didn't exist when Buffett had his fund. Additionally, when Pabrai launched his fund, the requirement was much lower. I believe it was the same as the accredited investor standard back then. So, if your friends and family aren't qualified clients, and you choose the Pabrai/Buffett fee structure, you're going to be working for free whether you like or not until you can either get the investors up to that standard with the fund's performance, or you attract wealthier clients. This is the sad part of these regulations, where in the name of protection, it reduces the ability of funds to bootstrap. At least for those who don't have wealthy friends and family. Though, clearly from the examples on this thread, many have powered through and done it anyway, whether they are rightly compensated for it in the beginning or not. I commend those of you that have done this, but it would be very difficult to do without an understanding spouse or some other income stream.

I have a few IRA investors in my hedge fund. I've had them go through Advanta IRA and have been pretty satisfied: http://www.advantaira.com The idea is that Advanta acts as the IRA custodian, ensuring you abide by the IRS rules and providing proper documentation. Then you're able to direct the investment into a private placement such as a hedge fund or private equity fund. The process is pretty painless. Feel free to PM me and I'll give you some referral info if you're interested. There are some larger companies out there that act as IRA custodian as well. You just have to balance their fees and services.

A big part of it is ensuring any potential Berkshire acquisitions (especially family owned) understand that Berkshire will honor its promises, even when Buffett is gone. So, yeah, Benjamin Moore probably would be more profitable selling in a different way, but the issue is bigger than just Benjamin Moore.

Buffett spoke at some length about the Abrams firing earlier this year at the annual meeting. When they purchased Benjamin Moore it was with the explicit promise that the dealer system would be preserved. Abrams refused to respect Buffett's decision on it. Apparently Buffett was notified of Abram's actions by the dealers. At the meeting, Buffett said Benjamin Moore would always follow the dealer system and his statements were meant to bind future Berkshire CEOs to Buffett's promise.

Just FYI that I recently spoke with Jack McCall at PDRX. He said the $46.4m contract is a perfunctory renewal and will likely not change revenue. They expect to only receive a few hundred thousand dollars of revenue from it. I also asked him what some of the risks to the company would be. He said if they lost their DEA license the company would be over. I don't have a position, but it looks cheap even without the revenue from that contract. Thought I'd throw that info out to you guys.

With regards to the 25% rule, it is a bit technical, and some of the rules changed a few years ago. Many of the attorneys are still working off of the old rules. So, check with your attorney, but be aware of some of this info. IRAs are considered to be benefit plan investments for IRS purposes, but not for ERISA purposes. What this means, is that the 25% ERISA limit applies to IRAs only if there is at least $1 of other ERISA money in the account. However, if the account contains IRA money only, along with other non-ERISA money, then the 25% limit does NOT apply. Once a fund accepts ERISA money, then the IRA money counts along with the ERISA money towards that 25%. The confusion comes in because the law changed in the 2006 pension protection act. IRAs now count as "benefit plans" for IRS purposes, but not for ERISA purposes. So, as long as you don't accept accounts like pension plans, HSAs, 401Ks, etc., you can have an unlimited amount of IRA money in the hedge fund and it won't trigger the rule. The attached gives a bit more info. Pepper_Hamilton_IRA.pdf

I was reading the attached interview with Walter and Edwin Schloss and Walter makes a reference to the fact that Ben Graham managed money for others before the depression where he took 50% of the gains and shared in 50% of the losses. Obviously when the depression hit, Graham was wiped out. Leaving the part about Graham being wiped out aside, I've been wondering for years why there's not a single hedge fund I'm aware of that does this today. It's got to be one of the most fair ways to partner with your investors. Does anyone have any thoughts on this structure? Has anyone seen a fund like this? I have a small fund with a typical fee structure (1 and 20 w/4% hurdle). I would think a 50/50 setup would garner some attention and at least a few investors. I may even be interested in launching something like this. 6.00JoeRosenfield2.pdf

I haven't looked into VELT at all, but maybe I should given how it's now bouncing around its 52 week low. I don't know that I have any insights there though. Have to expand the circle of competence. If anyone has additional thoughts on it, it would be interesting to hear them.

Cale Smith started something called a Spoke Fund a few years ago, which are essentially managed accounts where the portfolio has a significant investment with the same holdings. He's grown assets fairly rapidly and has had great returns. You may enjoy his presentation from his annual meeting. He talks about JCP, VELT, and MKL. Full disclosure, I consider him a friend. Great guy, highly ethical, very smart. He may even be on the forum. https://www.islainvest.com/2013/07/17/annual-investor-meeting-presentation/

I would love to eat In and Out for lunch at the Berkshire meeting!

I haven't watched this yet, but thought it might be of interest to the board. It's a 45 minute video that will apparently tell us everything we need to know about finance and investing. William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour: