How Berkshire Hathaway is inspiring Wall Street wannabes

by Allison McNeely

The newest trend in alternative investing is trying to look like Warren Buffett’s conglomerate, Berkshire Hathaway Inc.

The chief executive officers of KKR & Co., Brookfield Asset Management and Pershing Square Capital Management have touted aspects of the Berkshire investment model, which centers on taking in money through insurance and using it to buy and hold companies for the long term. That strategy led to a multi-decade run of market-beating returns and turned Buffett into a household name.

KKR Co-Chief Executive Officer Joe Bae has repeatedly cited Berkshire as the inspiration behind the New York-based firm’s decision to create its Strategic Holdings unit to hold long-term bets, an idea he reiterated Wednesday at the Bloomberg Invest conference in New York. 

“What we’re trying to build in Strategic Holdings is in some ways a mini Berkshire Hathaway,” Bae said.

Brookfield CEO Bruce Flatt said that its insurance business may ultimately own the rest of its operations, in a move that also would emulate Berkshire. Last year, hedge fund manager Bill Ackman last year invoked the Berkshire model when he was marketing the IPO of Pershing Square USA.

Several other themes loomed large at the two-day Bloomberg Invest event, with markets gyrating after President Donald Trump lobbed 25% duties on most Canadian and Mexican imports and raised the charge on China to 20%. Speakers offered sharply opposing views on the potential impact of tariffs and how protracted the trade war will be, and also also discussed the potential for artificial intelligence, the merits of private market versus public, and the best places to invest right now.

KKR’s Bae said that the firm intended to expand its Strategic Holdings unit beyond its current portfolio of 18 private equity investments into infrastructure and real assets. While it’s a small piece of KKR’s business now, Strategic Holdings is a key part of the firm’s plan to more than quadruple earnings per share over the next 10 years.

Alternative asset managers have started buying and building insurance companies that can generate a steady source of capital for managers to shovel into the private investments they structure. Apollo Global Management Inc., KKR and Brookfield all have life insurance businesses on their balance sheets, while firms like Blackstone Inc. have pursued investment management partnerships.

Brookfield’s “special ingredient” in the insurance business is that parent Brookfield Corp. sits on about $150 billion of capital, Flatt said. The firm has poured almost $20 billion into the equity of the insurance unit, Brookfield Wealth Solutions, and expects to keep building it out over the next 10 years. 

Private markets were also a hot topic.

Anne-Marie Fink of the State of Wisconsin Investment Board said she likes private assets for the longer term, while Steven Meier, the CIO of New York City’s retirement systems, said the pension system is boosting its exposure to alternative investments to 35% from 25%. 

But Soros Fund Management CIO Dawn Fitzpatrick took a contrarian view, saying she thinks private markets investors are in a “world of hurt” owing to poor returns and a lack of liquidity.

Tariffs dominated discussions both days, with the conference beginning on the day Trump’s tariffs took effect. On Wednesday, he said he’s exempting automakers for one month. Many panelists said the uncertainty surrounding the tariffs could weigh on markets and cause consumers to grow cautious. Knighthead Capital’s Tom Wagner said he thinks any impact will be short-lived. Former US Treasury Secretary Steve Mnuchin, for his part, said he likes the idea of an across-the-board 10% duty.

The sharpest critique came from Robert Rubin, who served as Bill Clinton’s Treasury secretary. He said what Trump is doing risks undermining the global economic framework established after World War II, which was built around reducing trade barriers to improve people’s livelihoods.

“We have spent all these years since World War II developing alliances and allies, supported by all sorts of commitments,” Rubin said. This was “all in our economic self-interest and our geopolitical self-interest — and I think we’re putting all that at risk.”