Institutional Investor's Alpha Magazine - October 2007 - (Page 69)

Profile Mohnish Pabrai Oracle of I n just eight years, Mohnish Pabrai, a 43-year-old native of Mumbai, India, has made a name for himself as a value investor to watch. Internet chat rooms track his investments, and devotees quote his “Heads, I win; tails, I don’t lose that much” philosophy of buying companies with huge upside and virtually no downside. Pabrai, a guest speaker at two value investing conferences this spring, has written two books on value investing and been interviewed on CNBC and Bloomberg Television. This summer, following four failed attempts, he outbid rivals for the right to have lunch with the world’s most successful value investor, Berkshire Hathaway chairman and CEO Warren Buffett. Pabrai has racked up impressive gains. Since 1999, when he began with an initial $1 million, which included $100,000 of his own money and $900,000 from fellow members in the Chicago area’s Young Presidents’ Organization, he has averaged a 29 percent average annual return, after fees, through June 2007. “Investing is painfully easy for me,” Pabrai has said on more than one occasion. Eight years is too short a time to declare Pabrai the equal of such master value investors as Peter Cundill, Irving Kahn, Bill Miller and Marty Whitman, let alone Buffett and his partner, Charles Munger. But if a current gamble pays off, Pabrai could prove to skeptics that he has the Buffett touch. Pabrai manages $600 million in three hedge funds — two offshore and one domestic — from a suite of modern, marble-and-brass-appointed offices in Irvine, California. Because of his returns, he has attracted the attention of the hedge fund industry. Most consultants, however, are reluc- The Irvine By Jaye Scholl tant to recommend Pabrai Investment Funds to institutional investors. They wonder how Pabrai can manage $600 million with only three part-time assistants, and they balk at his refusal to reveal anything about his holdings beyond what is in his ﬁrm’s regulatory ﬁlings. “Yeah, institutions look at us and take a pass because of my bizarre rules,” acknowledges Pabrai. In addition to offering zero transparency, California-based he says he never takes phone hedge fund manager calls from investors; never meets with CEOs or senior Mohnish Pabrai has management; seldom discusses his holdings, even at modeled himself after his annual meetings, one of which is held in Southern value investor Warren California and the other in Buffett. But a big bet on Chicago; requires a twoyear commitment from ina subprime lender vestors; and forbids them from withdrawing money at could determine year’s end. whether Pabrai will Nor is Pabrai registered as an investment adviser ever live up to his idol. with the Securities and Exchange Commission. He says the upside doesn’t justify the time and costs. But like his hero Buffett (and, it should be added, Alfred Winslow Jones, the creator of the ﬁrst hedge fund), Pabrai charges no management fee. Instead, he takes 25 percent of any proﬁts above a 6 percent hurdle rate. OCTOBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 69

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2007

Institutional Investor's Alpha Magazine - October 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Applied Knowledge The Good Guys: Autism Advocate Interview: Nerves of Steel Cover Story: Ivy League Education Alpha Awards: Top Service Providers: Trying Times Strategies: Passage to India Profile: The Oracle of Irvine Alpha Bytes: Futurama Research Center: Funds of Funds 50 Unhedged: Commentary: Crisis? What Crisis?

Institutional Investor's Alpha Magazine - October 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.