Buffett’s Secret Aussie Share Play?

Question


Hi Scott,

I know you’re a fan of Warren Buffett’s Berkshire Hathaway. Well, there’s a relatively small listed investment company (LIC), called Global Masters Fund Limited (ASX: GFL), that invests in Berkshire Hathaway, UK shares and cash. It appears to have performed fairly well over the last five years or so. I am considering investing in it but have some reservations, like their exposure to the UK market given the Brexit situation. Is there any advice you can provide on weighing up a fund like this?

Terry

Scott's Answer


Hi Terry,

Yes, I’ve heard of Global Masters.

I wrote about them when they first listed in 2006, and then sent my column to Warren Buffett himself in the post (he doesn’t do email). A few weeks later, Buffett sent me a handwritten letter thanking me for alerting him to Global Masters, and for advising people not to invest in them.

As of 30 September the Global Masters portfolio has 63.8% invested in one stock, Berkshire Hathaway, 9% in ASX-listed investment company Flagship Investments, 6% in the Athelney Trust PLC, 6.3% in cash, and 14.7% in something they refer to as “other UK”.

(Interestingly, the Managing Director of Global Masters is also a director of Flagship Investments, and the Athelney Trust.)

Global Masters estimates its fees at just 0.23%.

Which is fairly low. Cheaper than many exchange traded funds (ETFs).

Except … it’s not. Flicking open their annual report I see that shareholders also cough up for auditor costs, share registry costs, directors’ fees and admin costs. Put it all together and the true cost of investing through Global Masters is actually closer to 2.2% — and that’s bloody expensive!

So, Terry, considering you don’t even like the UK investments … why not just Brexit?

With international brokerage fees as low $10 a trade (and there are some apps that are free, but they tend to screw you on the currency conversion), why not buy shares directly in Berkshire Hathaway (BRK.B) on the NY stock exchange?

After all, Buffett refers to his shareholders as partners, and treats them as such. A quick look at Berkshire’s annual report shows that he takes a salary of just $US100,000, and even reimburses the company for personal expenses.

Scott