“So the really big money tends to be made by investors who are right on qualitative decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative decisions.” — Warren Buffett, letter
Warren Buffett started his investment partnership in 1956 with $105,100 of capital made up of his own funds and investments from family and close friends. According to the BLS inflation calculator, initial capital was $840,920 measured in 2010 dollars which would be a very small sum to start a modern day hedge fund. What is even more remarkable was the fee structure of the Buffett Partnerships. Mr. Buffett, as the general partner, took 25 percent of all profits in excess of 6 percent. There was no “2 and 20” structure in which the general partner received any guaranteed payment. With nearly all of his net worth invested in the fund and a young family to support, it obviously took a very self confident 25 year old to start this venture. Read this article for more details and a link to extensive notes on the letters by Frank Gifford, a Berkshire shareholder.