The Advantage Of Permanent Capital

As the global investor panic routed markets, those not beholden to investor flows should refocus on the long term.

- Simon Brown

Warren Buffett often talks about the immense benefit of Berkshire Hathaway having permanent capital. He also mentioned it in his February letter to shareholders and he’s right that it makes a real difference to an investor if they have permanent capital.

Let’s start with the inverse – what is non-permanent capital? It is money that investors give to managers to invest on their behalf. This will mainly consist of unit trust and hedge fund managers. The manager has the right to allocate that money within the fund’s mandate, but that right lasts as long as the investor agrees to leave the money with them, and the investor can, with as little as a day’s notice, get their money back.