But there is another reason Why Buffett does this, and that is because of his integrity. Throughout the buffett partnership saga, you can see how Buffett acted with integrity towards his sponsors, and how he acted with integrity in terms of investment strategy – he wasn`t ready to try a new unproven method simply because he found it increasingly difficult to pursue his proven approach. He even entered into the partnership because he refused to gamble money with his LPs, when he could have continued for at least a few years. After all, at the end of the partnership, Buffett even chose a new fund manager for his partners – not on the basis of his CV or IQ – but on the basis of his moral character. Finally, new investors in Buffett`s partnership immediately linked their overall investment to Buffett, and Buffett probably invested it as soon as he could find a cheap stock. With respect to limited partnership contracts, investors should not transfer their investments until VC has reached an agreement to invest in. As Buffett put it, in the early years of his partnerships, he “killed the Dow.” Between 1957 and 1968, the Dow Jones Industrial Average increased by 9.1%. The Buffett partnership was 31.6% per year. So why did Warren Buffett decide to enter into his investment partnership in 1969? This structure protects the fortune of sponsorships from lawsuits. This is particularly important for passive investors. As passive investors, sponsorships cannot control the management of the business and would not be able to challenge illegal activities. Other investment firms also use an LP agreement to establish a relationship with investors, but do not follow Buffett`s salary structure. Many hedge funds and venture capital funds charge an administrative fee of 2% and earn 20% of all profits without barriers.
These fees are paid to the Komplesier, who is often the head of the fund. When external events (the lettuce oil scandal), which had nothing to do with long-term value, influenced American Express` share price, Buffett Partnerships took the opportunity to take advantage of the resolution of the situation.