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Berkshire Derivatives Risk to Shrink Under New CEO, Buffett Says

Warren Buffett, chairman of Berkshire Hathaway Inc., sings a song with University of Nebraska cheerleaders during an event at the Berkshire Hathaway annual shareholders meeting in Omaha. Photographer: Daniel Acker/Bloomberg
Warren Buffett, chairman of Berkshire Hathaway Inc., sings a song with University of Nebraska cheerleaders during an event at the Berkshire Hathaway annual shareholders meeting in Omaha. Photographer: Daniel Acker/Bloomberg

May 5 (Bloomberg) -- Warren Buffett, who accumulated more than $7 billion of liabilities on equity-index puts, said the risk from derivatives at his Berkshire Hathaway Inc. will decline under the company’s next leaders.

“I don’t think there’ll be much of a derivatives book” under a new chief executive officer, Buffett, 81, said today at Berkshire’s annual meeting in Omaha, Nebraska. “There are a few operating businesses that will have minor positions.”

Buffett sold equity derivatives to undisclosed buyers for $4.9 billion in 2006 and 2007, when markets were near their peaks. Liabilities on the bullish bets climbed as stock indexes declined. Buffett has hired former hedge fund managers Todd Combs and Ted Weschler to eventually oversee the company’s investments, including an equity portfolio valued at more than $80 billion.

“It’s very unlikely that they do anything with derivatives,” Buffett said of Combs and Weschler. “I wouldn’t restrict them.”

To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Margaret Collins in Omaha at mcollins45@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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