Would-Be Buffett Successor Pulls Plug On Hedge Fund

Oct 27 2010 | 10:09am ET

With its founder headed for Berkshire Hathaway, Castle Point Capital is closing up shop.

Stone Point Capital, the private equity firm that seeded the $400 million firm five years ago, told investors that its Trident III arm would liquidate the fund, which has posted a 34% cumulative return but has suffered losses in each of its last three years, including this one.

Castle Point founder Todd Combs yesterday was tapped by Berkshire's Warren Buffett to manage a "substantial" amount of money for the firm, making him a front-runner to succeed the legendary Oracle of Omaha.

Stone Point said that Trident III has enjoyed a $54 million return on its initial $35 million investment.

Castle Point has already liquidated about 90% of its investments and expects to finish selling off the portfolio over the next few weeks, although it warned some positions may take longer to liquidate. It also said that it would suspend the accrual of management fees for the parts of its portfolio already in cash.

Trident III said it expected to receive 90% of its money back by the end of November, and the rest following the firm's year-end audit.

"We are happy for Todd," Stone Point said. But it did lament the "disappointing news… given the success that Castle Point has had in building its platform during the past five years."

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