A small college in Iowa owes a lot of its endowment’s gains to Warren Buffett… and to some pretty “outrageous” investment strategies he helped deploy on the endowment’s behalf. Buffett’s strategies for the little known Grinnell College included highly risky strats like buyouts and arbitrage plays – and they worked: they helped turn the college’s endowment into a $2 billion financial powerhouse, according to Bloomberg.
Buffett reveals in a new book that his partnership with fellow Grinnell trustee and friend Joe Rosenfield helped him find joy in investing on behalf of the endowment. The results of the the Buffett/Rosenfield partnership still have a profound effect on the 1700 students that attend the Iowa college today.
Rosenfield was a Grinnell graduate in 1925, and an attorney whose family owned department stores across Iowa and the Midwest. Rosenfield saw growing the endowment as the college’s best path to survival and enlisted Buffett to help after a casual introduction by a cousin of his. The two spoke during late night phone calls about ideas, Buffett recalls.
“I can’t recall any committee assignments in my lifetime in which I experienced such pleasure. When Joe would call me at night to discuss some action that would swell Grinnell’s coffers, his enthusiasm was that of a kid in a candy shop. I couldn’t help but share it” the Omaha Octogenarian wrote.
“The more outrageous the act might seem for a college endowment, the better Joe and I liked it,’’ Buffett said in the forward to the recently released book “Mentor: Life and Legacy of Joe Rosenfield”.
He continued: “Every investment move was always entertaining for us and always (well, almost always) profitable. In fact, we truly had more fun making money for the college than we did in making investments for ourselves. We conspired to have the college buy convertible debentures in a startup (Intel); shorted securities in a ‘can’t-lose’ arbitrage (AT&T); made a leveraged buyout of a network television station (WDTN in Dayton); and the list goes on.”
Grinnell even purchased a TV station back in 1975. When Buffett called Rosenfield to tell him that stations in Cincinnati and
Dayton were up for sale, but that he couldn’t purchase them due to regulatory restraints, he told Rosenfield it would be good for Grinnell. The board invested $11 million in a Dayton TV station after “an extensive presentation from Joe and Warren Buffett, who had colluded before the meeting.’’
Eventually, the station’s value more than quadrupled and was sold in the mid 1980’s. That’s when value investing still worked as markets hadn’t been taken over by central banks, high freaks, and the relentless inflows of “communist” ETF money.
Rosenfield, who was a college trustee for 59 years, passed away at the age of 96 in the year 2000.
“He was an extraordinary friend and one of the people I admired most in the world,” Buffett told Bloomberg in an email.
via ZeroHedge News http://bit.ly/2Vcv1Gp Tyler Durden