Oregon’s Public Employees’ Retirement Fund has reduced its stake in Berkshire-Hathaway by a 40% in reaction to B-H’s lacklustre performance. From Barron’s:
Warren Buffett isn’t close to beating the market this year, and a giant pension fund has cut its investment in Berkshire Hathaway , the investment juggernaut that Buffett helms.
Class B shares of Berkshire Hathaway stock (ticker: BRKb ) have only managed a 0.9% gain so far in 2019 through Friday’s close, in sharp contrast to the S&P 500’s 18.7% rise.
We’ve noted that Buffett suffered “a reputational and financial black eye” earlier this year as Berkshire took a $1 billion paper loss when Kraft Heinz stock (KHZ)—one of its larger investments—tumbled. Years ago, Buffett backed the combination of H.J. Heinz and Kraft Foods Group that created the company.
Oregon’s Public Employees’ Retirement Fund slashed two-fifths of its Berkshire stock investment by selling 141,822 Class B shares in the second quarter. OPERF, as the pension is known, made the disclosure in a form it filed this week with the Securities and Exchange Commission. OPERF, which recently was counted as the 42nd largest public pension in the world by assets, now owns 222,763 Class B Berkshire shares.
The reality is that they had to. The fund’s assumption is a 7.2% return. With such a large stake in B-H the company’s low returns threatens the fund’s entire structure. Look for a lot more of this especially from pension funds with higher assumptions. They will encourage greater risk-taking which inevitably will mean more losses.