Fairfax 2026

[djokovic1]

50 minutes ago, Marco Van Basten said:

Where are you getting average annual fixed income return = 4.2% over the past 40 years?  That seems extraordinarily low.  Even AI claims it averaged 4.61% for a 5 year treasury.  Given that Fairfax seems to have bought corporate debt and mortgages, my guess is that the return on the fixed income portfolio was north of 6% per annum over the past 40 years.  

Do you have a more accurate number? Where does the 6% come from precisely? Even if 5 year bond yields average 4.5% over the last 40 years, Fairfax has always run much shorter duration than that. How do you factor that in to your analysis?

 

Btw, even with your 6% assumption the equity returns are 12%+ which beats the S&P over 40 years.....can't argue with that?

 

 

47 minutes ago, Marco Van Basten said:

f we assume that those returns are indeed correct, then why didn't Fairfax raised a twenty billion or forty billion hedge fund from endowments and ran it with the incentive and management fee going to the company?

 

Why didn't Buffett do this?

Edited 5 hours ago by djokovic1

[Viking]

I think it is pretty much impossible to determine a rate of return on Fairfax’s equity book over the past 40 years. What do you include? CDS? Equity hedges? TRS? Some of these were risk management positions, others were investments? 
 

But we do know with certainty one thing: Fairfax’s share price compounded at 19% for the past 40 years (US$; dividends reinvested). That is elite performance. Clearly, Fairfax is doing a number of things exceptionally well. 
 

Fairfax has two businesses: 

• Insurance
• Investments. 

We also know returns from the insurance business were weak pre-2010. 
 

As a result, I suspect investments have been an important driver of long term results.
 

What did they return each year?
 

No idea. And I don’t need to know… All I have to do is look at the stock price to know what I need to know. (Fairfax’s total performance has been elite.)

 

I am a quickly becoming a Thordike desciple…. Capital allocation is the most important thing over the long term for a company like Fairfax. Capital allocation drives per share results over the long term more than anything.

But assessing capital allocation is not easy - so most investors/analysts ignore it. Instead they focus on other things that are easier. 

Edited 1 hour ago by Viking

[Txvestor]

4 hours ago, djokovic1 said:

Do you have a more accurate number? Where does the 6% come from precisely? Even if 5 year bond yields average 4.5% over the last 40 years, Fairfax has always run much shorter duration than that. How do you factor that in to your analysis?

 

Btw, even with your 6% assumption the equity returns are 12%+ which beats the S&P over 40 years.....can't argue with that?

 

 

 

Why didn't Buffett do this?

Thats what I was saying about being invested in the model than the stock/equity picking acumen of HWIC. If they manage to do that, it would be icing on the cake. Even a mere 5% annual gain on the equity book get you to double digit equity returns. And we already currently have billions in unrealized gains in the trunk(almost worth around 15% of total equity worth). 

Edited 22 minutes ago by Txvestor