Investor and billionaire Warren Buffett told an arena full of shareholders on May 3 that he will retire by the end of the year, capping off roughly six decades of running his Berkshire Hathaway firm that made him a world-famous investor.
Buffett said he will recommend his firm’s vice chairman, Greg Abel, to replace him in discussions with Berkshire Hathaway’s board on Sunday.
“I think the time has arrived where Greg should become the chief executive officer of the company at year end,” Buffett said.
While Abel has been Buffett’s designated successor for years, amid managing much of Berkshire’s noninsurance businesses, it was expected that he would not take over until after Buffett died. Additionally, Buffett, 94, had always said he had no intention to retire.
The retirement announcement was made at the close of a five-hour question-and-answer period, with Buffett not taking questions on the topic. The only board members who knew ahead of time were his two children, Howard and Susie Buffett, he said.
Abel, who was positioned next to Buffett on stage, did not know in advance. An hour later, Abel returned without his boss to conduct Berkshire Hathaway’s formal business meeting, where he reacted to the news.
“I just want to say I couldn’t be more humbled and honored to be part of Berkshire as we go forward,” Abel said.
Many investors have expressed confidence in Abel’s ability to run the firm, but it’s not yet clear how that will extend to investments of Berkshire’s funds. On Saturday, Buffett endorsed his successor and pledged to keep his money invested in the firm.
“I have no intention—zero—of selling one share of Berkshire Hathaway. I will give it away eventually,” Buffett said. “The decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg’s management than mine.”
After announcing his retirement, Buffett was met with a standing ovation from thousands of investors in the Omaha arena, celebrating his 60 years of leading the company.
During his tenure, Berkshire nearly doubled the returns of the S&P 500, with a 19.9 percent compounded annual growth rate compared with the index’s 10.4 percent gain.
In that time, Buffett amassed a devoted following of investors who copied his investments and moved the markets whenever his plans were disclosed publicly.
Although Abel has already managed much of Berkshire for years, that hasn’t included leading the firm’s insurance operations or making investment decisions for its cash. As he takes on those tasks, Vice Chairman Ajit Jain will stay on to help manage the insurance companies.
Prior to Buffett announcing his retirement, Investment manager Omar Malik of Hosking Partners in London said he wasn’t concerned about the future of Berkshire under Abel.
“He’s had such a long time alongside Warren and a chance to know the businesses,” Malik said. “The question is, will he allocate capital as dynamically as Warren? And the answer is no. But I think he’ll do a fine job with the support of the others.”
Smead Capital Management’s Cole Smead said Buffett’s retirement wasn’t a surprise after watching him on Saturday; the 94-year-old had inadvertently made a basic math mistake in one of his answers. At another time, Buffett seemingly got off track, telling stories of his years investing without directly answering a question he was asked.
While Abel is well regarded among Berkshire managers and has received praise from Buffett for his business acumen, it will be hard for him to match his boss’s performance, particularly as he lacks the control of 30 percent of the firm’s stock that Buffett currently possesses.
“What has happened in the last 30, 45 days ... is really nothing,” Buffett said. “This [has] not been a dramatic bear market or anything of the sort.”
The veteran investor emphasized that drastic market swings, while uncomfortable in the short term, are not a reason to panic.
“If it makes a difference to you whether your stocks are down 15 percent or not, you need a somewhat different investment philosophy,” he said. “The world is not going to adapt to you. You’re going to have to adapt to the world.”
