The Dhandho Investor: The Low-Risk Value Method to High Returns

by Mohnish Pabrai

The typical mutual fund holds over 80 positions. Even though he likely hadn’t heard of Kelly, it implicitly made sense to Mr. Buffett to run a concentrated portfolio. It appealed to me as well and I cloned this, too. • Most hedge funds typically have large institutional investors. Most mutual funds have thousands of mom-and-pop investors. The Buffett Partnerships had neither. It had about a hundred families invested in the funds. Mr. Buffett started with eight initial investors who were close friends and family. He did a good job for them, and they in turn added more funds and brought in more investors. They were his unpaid (and highly effective) sales force. I simply cloned this, too. Pabrai Funds started with eight investors—mostly very close friends. It now has about 400 families invested in the various funds. We are likely one of the only hedge funds around where the $300 + million in assets belongs to about 400 families from all over the world, with virtually no institutional participation. • Mr. Buffett ran the Buffett Partnerships without any analysts or other General Partners. All the research into all the investments was done solely by himself. This is highly unusual. Virtually all mutual funds and hedge funds have armies of investment managers and analysts. Pabrai Funds shamelessly copied this, too. Pabrai Funds operates with an investment team size of one. I’m not aware of any mutual funds or hedge funds with over $300 million in assets operating with a single-p...