{"id":1115,"date":"2012-08-17T05:00:03","date_gmt":"2012-08-17T12:00:03","guid":{"rendered":"https:\/\/masonmyers.com\/?p=1115"},"modified":"2015-01-28T12:58:44","modified_gmt":"2015-01-28T20:58:44","slug":"investment-funds-strategy-structure-john-bogle","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/investment-funds-strategy-structure-john-bogle\/","title":{"rendered":"“Strategy Follows Structure” — John Bogle on Investment Funds"},"content":{"rendered":"

Investment Fund Structures<\/h2>\n

\"Strategy<\/a><\/p>\n

As “Form Follows Function…” In Investment Funds, “Strategy Follows Structure.”<\/p>\n<\/div>\n

“You are what you eat” is the common phrase about nutrition.\u00a0 With investing, I think a corollary should be “you are where & how you get your capital”.\u00a0 This is particularly true with any type of investment fund as John Bogle, the founder of Vanguard, stated in a New York Times<\/em> article on Sunday when he said, “strategy follows structure” in investing.<\/p>\n

Vanguard, Berkshire Hathaway, and my investment fund, Greybull Stewardship<\/a>, have large structural advantages that allow them to implement superior investing strategies.\u00a0 Vanguard is owned by its investors which creates a clear focus on low-expense mutual funds.\u00a0 Berkshire Hathaway has a structure (certain types of stockholders, certain type of corporate structure) that makes it a preferred home for some of the best businesses in the world.\u00a0 Greybull Stewardship also has a different structure than traditional private equity funds<\/a> (no 10-year fund life, preference to invest in flow-through entities, investment capital coming from other business owners) that makes it a preferred partner for business owners who want a stable, long-term partner aligned with the interests of their business and themselves.<\/p>\n

Investment Strategies Via Fund Structures<\/h3>\n

Let’s explore how the structure of Berkshire Hathaway is built to enable a certain investment strategy.\u00a0 Buffett’s strategy is to attract to Berkshire great businesses that are often still managed by a large owner of the company.\u00a0 Not by accident, these tend to be the businesses with the strongest competitive advantages and most owner-oriented managers, exactly the characteristics that Buffett wants.\u00a0 Owners of the best businesses in the world are often as concerned with who buys the business as with the highest price.\u00a0 It isn’t easy to build a unique, high-quality business and most owners of these businesses don’t want to sell to just anyone.\u00a0 When an owner cares about the new owner, it is often a signal about the quality and staying power of the business.\u00a0 Here are some observations on how Buffett does it:<\/p>\n