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By Jason Stipp | 04-27-2011 04:17 PM

What Happens After Warren?

Morningstar's Christine Benz and Jason Stipp discuss how Berkshire Hathaway investors may want to frame their thinking about future management changes at the firm.

Jason Stipp: I am Jason Stipp for Morningstar. Ahead of the Berkshire Hathaway Annual Meeting, we're talking about some of the big themes that are going to be on investors' minds, and the succession issue obviously is one that springs to mind.

This is not a new topic, of course, but how should investors frame their thinking about the succession plans that will someday have to take place at Berkshire Hathaway?

Here to offer some insights is Morningstar's director of personal finance Christine Benz.

Thanks for joining me, Christine.

Christine Benz: Jason, good to be here.

Stipp: So I have this thesis that thinking about Berkshire Hathaway and the management change there, could be akin to thinking about a mutual fund and a management change there. Does it make sense to think about Berkshire in terms of being a mutual fund?

Benz: I think it's a decent analogy, Jason. You do have at Berkshire a manager running a basket of different investments, making those allocation decision just as a mutual fund manager would. So, I think it stands up from that standpoint. It's a well diversified basket of investments.

The one thing that might be different is that when Warren Buffett does eventually decide to step away from Berkshire, you could see a price shock in Berkshire shares. That's not typically something you see when a mutual fund manager leaves, the basket of underlying investments won't change all that much, unless in a very rare situation there would be mass investor redemptions that would cause the fund to have to make some changes. But generally speaking you have a lot of stability. You really have to sit there and evaluate the new manager. With Berkshire there could be some price shocks when Buffett steps away.

Stipp: So, certainly to the extent that people have outsourced those capital allocation decisions to Warren Buffett, it is sort of similar to finding a manager that you really like on the stock mutual fund side and outsourcing those allocation decisions to that person.

So, we had spoken that there might be some ways that investors at Berkshire Hathaway might be better off than investors in a mutual fund with a similar manager change, and some ways that they might be a little worse off in evaluating a new management

Benz: Right.

Stipp: Can you run through some of those?

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