Monday, July 6, 2009

LA Museum decides to change investment approach - sell lots of BRKA

Moody's also noted that the museum has revamped its unusual, longstanding policy of betting virtually all of its endowment on a single stock (albeit a diversified and legendarily lucrative one), Warren Buffet's Berkshire Hathaway. Berkshire Hathaway suffered a 31.8% loss in 2008 -- better than the S&P 500's 38.5% beating, but worse, in this economy, than a portfolio containing a substantial mixture of more conservative bonds.

In January, Moody's said, the museum's board voted for a more diversified approach guided by an investment advisor, and began a gradual selloff of Berkshire Hathaway, with the goal of Buffet's company making up half its portfolio instead of more than 90%. The rest will be invested in stock and bond funds.

A Forbes magazine story from 1998 suggested one reason for the Natural History Museum's loyalty to Berkshire Hathaway. It told how Franklin Otis Booth Jr., a onetime Los Angeles Times executive who became a billionaire thanks to a $1-million ground-floor investment in Berkshire Hathaway in the early 1960s, gave the museum a 1977 gift of $350,000 worth of stock in a company that Berkshire Hathaway subsequently acquired. The museum's holdings were converted to Berkshire Hathaway stock. "Frequently, the museum's investment managers wanted to unload the shares. Booth discouraged it," Forbes reported -- and within 21 years his initial gift had grown to $80 million.

H/T Brk Board.