A knighthood for the ETF market – the star investor Warren Buffett is investing for the first time in exchange-traded funds. Is the Omaha Oracle Now Changing Its Strategy?
• Buffett invests in ETFs for the first time
• Relatively small position in the Berkshire portfolio
• Is the star investor pursuing a new strategy?
Star investor Warren Buffett is known for his well-thought-out investment strategy and the associated careful stock selection. In the past quarter, he and his holding company Berkshire Hathaway again invested heavily in shares, as can be seen from the last quarterly 13F report 2019. The biotechnology group Biogen and the supermarket chain Kroger were added. But that was not all, because there was also a surprise.
First time investment in ETFs
This is how the Oracle of Omaha first invested in exchange-traded funds – the two ETFs are the only known ETF holdings of its investment vehicle Berkshire Hathaway. With the Vanguard S&P 500, which runs under the ticker VOO, and the SPDR S&P 500, known as SPY, the investor legend has invested money in two passive funds that represent the market-wide S&P 500. A total of $ 25 million should have flowed, as BNN Bloomberg reports, which corresponds to a comparatively small position in the portfolio of the holding company, whose market capitalization is around $ 550 billion.
Change of strategy?
Market participants are now wondering why Warren Buffett took this step right now. As OnVista reports, the star investor has long emphasized the relevance of passive funds in private wealth accumulation. In addition, a paradigm shift could be pending – instead of relying on individual strong values, Buffett could increasingly rely on the overall market in the future. Attractive alternatives may also be missing. “SPY VOO offers institutional investors the opportunity to stay in the market while keeping their options open when looking for individual stocks,” added Todd Rosenbluth, director of ETF research at CFRA Research. Another reason for this type of investment could be that Berkshire Hathaway did not want to build up any more cash reserves. “They almost use it as a temporary parking lot, and I think liquidity is what attracts them,” said Eric Balchunas of Bloomberg Intelligence.
Ultimately, it can only be speculated as to why Warren Buffett actually invested in ETFs through his investment company Berkshire Hathaway and whether further investments in this area will follow. In any case, the industry should benefit. Balchunas called it “ultimate support” for the ETF market, according to BNN Bloomberg.
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