- Charlie Munger made an extremely rare decision to invest with a fund manager in Australia.
- He championed Charles Jennings, who has modeled his Stonehouse fund on Berkshire Hathaway.
- Munger praised Jennings' focus on business fundamentals, rational mind, and high ethical standards.
Charlie Munger, one half of an iconic investing duo, almost never relies on anyone besides Warren Buffett or himself to manage his money. Yet he recently handed a sliver of his personal fortune to a fund manager who's trying to build an Australian version of Berkshire Hathaway.
Munger, Buffett's 98-year-old business partner and Berkshire's vice-chairman, made the rare decision to invest with Charles Jennings, the founder of Stonehouse.
Jennings, who attended his first Berkshire annual meeting as a teenager in 1995, modeled Stonehouse on Buffett's conglomerate. He seeks to acquire and own businesses for the long term, and has structured his fund as a web of decentralized, autonomous subsidiaries.
"He has a mindset very much like ours," Munger, now a limited partner of Stonehouse, told the Australian Financial Review about Jennings. "Business fundamentalism and relentless rationality and doing business in a very high-grade way."
"You think everybody's willing to stay rational but of course they aren't, the world's full of madmen," Munger added. The billionaire investor has previously bemoaned mindless speculation on meme stocks, cryptocurrencies, and other high-risk assets, and accused Robinhood of encouraging people to treat investing like gambling.
Stonehouse only has three subsidiaries: a horse-transportation company, a plant supplier, and a maker of portable fridges and iceboxes.
"He owns radically different businesses, which is a Berkshire-type thing," Munger told AFR. "It's very hard to acquire unrelated companies, earn a higher return on capital, and pay market prices for them."
Berkshire — which owns scores of businesses including Geico, See's Candies, and the BNSF Railway — and Stonehouse make winning acquisitions because their purchases are rare and prudent, Munger said, describing Jennings as a "kindred spirit."
Munger noted there's less competition to buy businesses in Australia than in the US, and expressed hope that his public support of Jennings would raise awareness of Stonehouse among future sellers of businesses.
Buffett's right-hand man was introduced to Jennings by the University of Chicago's endowment manager, AFR reported. The pair connected over Zoom meetings last year, and finally met in person in January.
"Having Charlie become involved in our business has been surreal," Jennings told AFR. "I've admired him my whole life, and he's now become a business partner."
Munger also lavished praise on Jennings, but emphasized he isn't betting the farm on the investor.
"The money is not all that material for the Mungers," he said. "I did it because I admired him, and he's a rare type and I thought it would help him."
Munger disclosed in 2019 that Li Lu, a hedge fund manager who he dubbed "the Chinese Warren Buffett," was the only outsider in 95 years to be trusted with "Munger money." The investor praised Li at the time for focusing on Chinese stocks instead of the oversaturated US market, and appears to see similar value in Jennings' focus on Australian businesses.
Stonehouse has around $120 million in capital under management, and aims to buy businesses valued between $20 million and $150 million.