Before You Invest Your Money

It’s a “foregone conclusion” that Chinese-American hedge fund manager Li Lu will become one of Berkshire Hathaway’s top investment officials, Charlie Munger told The Wall Street Journal in an article published on the front page of today’s WSJ.

Munger, Berkshire’s vice chairman and Warren Buffett’s long-time friend and business partner, met Li Lu in 2003 and soon tapped him to invest some of his family’s money.

Mostly thanks to a huge bet on Chinese auto- and battery-maker BYD Co., Munger got a fantastic return on the money invested with the now 44-year-ancient Li Lu. They later convinced Buffett to place $230 million of Berkshire’s capital into BYD, an investment that has since increased six times in value.

Buffett is quoted in the Journal article as saying that Li Lu is a candidate to be one of Berkshire’s money managers, but he’s not as definitive as Munger.

The WSJ article tells the tale of Li Lu’s upbringing in relative poverty in China. He later was a student leader in the Tiananmen Square protests in 1989 before fleeing to America, where he wrote a book about the experience. He got a scholarship to Columbia University in New York, where within six years he had earned undergraduate, law and graduate business degrees.

He then started a hedge fund, whose headquarters are in the same Pasadena, Calif., office building as Wesco Financial Corp., which Munger chairs and of which Berkshire owns 80 percent. His hedge funds have made 26.4 percent annualized since 1998, compared with 2.3 percent for the S&P 500. His company is called Himalaya Capital Management.

Li Lu’s philosophies on investing are right out of the Buffett playbook — find a few fantastic investments in a lifetime, bet huge and you’ll do just fine. That’s what he did with BYD. Berkshire shareholders will hope he can do the same again, assuming Munger is right about his odds of becoming one of the people eventually tasked with filling Buffett’s giant shoes.