Todd Combs: From the "failed heir" of the "stock god" to the helm of JPMorgan's "American mega fund"

Todd Combs, once regarded as one of the potential successors to "Oracle of Omaha" Warren Buffett, is experiencing a significant turning point in his career. He will leave Berkshire Hathaway, where he has served for over a decade, to join Wall Street giant JPMorgan Chase, where he will lead a newly established strategic investment fund worth $10 billion.

This change not only marks a reshaping of Combs' personal role but also highlights the subtle shifts in investment power within Berkshire in the post-Buffett era, as well as JPMorgan Chase's ambitious aspirations in the strategic investment field.

According to JPMorgan Chase's announcement this week, Combs will officially take up his new position in January next year, overseeing the bank's newly formed Security and Resiliency investment fund.

This move comes at a time when his future role at Berkshire has become "unclear." With Greg Abel set to succeed Buffett as CEO on January 1, and Buffett himself indicating that the company's investment portfolio will ultimately be decided by the new CEO, Combs' departure is seen by the market as a logical career choice.

Regarding this personnel change, JPMorgan Chase CEO Jamie Dimon expressed warm welcome, revealing to the Financial Times that when Combs showed interest in the new position, he responded, "If you have any interest in this, we will go all out." Dimon believes JPMorgan Chase is "a natural home" for Combs.

Meanwhile, Buffett also praised the move of his former employer, stating that JPMorgan Chase "has once again made a good decision."

Todd Combs, video screenshot

A Successor Once Full of Promise

Combs' career at Berkshire began in 2010 when he, along with another external fund manager Ted Weschler, was recruited by Buffett and was widely seen as a strong contender for the position of chief investment officer after Buffett's retirement.

The two were granted increasing authority, and by 2021, they jointly managed an equity investment portfolio of about $34 billion for Berkshire. Combs also took over as CEO of Berkshire's insurance giant Geico in 2020.

However, reports indicate that despite Combs and Weschler achieving strong investment returns early in their tenure at Berkshire, their excess returns gradually diminished over time. Buffett acknowledged in 2019 that the performance of these two investment managers was "slightly behind" the S&P 500 index.

An analysis for 2024 shows that over the past decade, Combs and Weschler's investment returns not only lagged behind that benchmark index but also fell short of the portfolio managed directly by Buffett. Days later, Buffett changed his mind and publicly stated that the next CEO of the company should have the final say over the stock investment portfolio, raising questions about the future roles of Combs and Weschler

JPMorgan Chase's New Mission

At JPMorgan Chase, Combs will face a brand new challenge: using the bank's own capital to make direct equity investments in companies deemed critical to U.S. national security. The $10 billion Security and Resilience Investment Fund he will oversee is part of a larger initiative by JPMorgan Chase.

The bank has committed to investing $1.5 trillion, focusing on key areas such as supply chain and advanced manufacturing, defense and aerospace, energy independence, and cutting-edge strategic technologies.

For JPMorgan Chase, investing in industrial companies using its own balance sheet is a new territory. Dimon emphasized that these investments will be "100% commercial" for JPMorgan Chase.

Reportedly, the bank's first deal involves taking a stake in a company based in Idaho that mines gold and antimony used for hardening bullets. Combs' role will be to identify and execute specific investment opportunities for this massive strategic plan, reporting directly to Dimon.

From Hedge Fund to Investment Giant

The 54-year-old Combs has a solid background in finance. He graduated from Florida State University and worked early on at the auto insurance company Progressive before pursuing further studies at Columbia Business School, Buffett's alma mater.

After graduation, he worked at the hedge fund Copper Arch and later founded his own hedge fund, Castle Point Capital, with backing from the private equity group Stone Point Capital.

According to insiders, the long/short equity hedge fund Combs founded, focused on investments in the financial services sector, achieved a 34% return over five years, including a mere 5.7% decline during the 2008 financial crisis.

His diligent research investment style—spending hours each day reading company materials—has earned him admiration from Buffett and his late partner Charlie Munger.

It was after a meeting with Munger that he got the chance to introduce himself to Buffett and eventually joined Berkshire Hathaway in 2010.

Dimon's "Keen Eye for Talent"

Dimon's connection with Combs dates back to a trip to Omaha in 2014. Dimon recalled that Buffett introduced him to Combs, saying, "You have to meet my new partner Todd." After about 35 minutes of conversation, Dimon believed Combs was "talented and thoughtful," and he began to consider inviting him to join the JPMorgan Chase board.

With Buffett's permission, Combs officially became a board member of JPMorgan Chase in 2016. According to Dimon, last November, when he discussed the bank's newly established strategic investment plan with Combs, Combs showed great interest.

To take on the new position, Combs will resign from the board. Although Combs' joining has sparked speculation about whether he might become Dimon's successor, JPMorgan Chase has made it clear that there are already excellent candidates within the company, and Combs' future focus will be on this new fund