Benjamin Graham's "The Intelligent Investor" + building blocks of the Berkshire Hathaway portfolio + our own analysis drive the …
Bernstein Value & Income Portfolio ("BVIP")
Investor Fact Sheet
The BVIP investment approach combines time-tested principles of value investing (first esta-blished by Benjamin Graham, successfully implemented by Warren Buffett) with modern investment management tools
The strategy is made fully transparent in "The Ten Commandments of the Intelligent Investor in the 21st Century", written by our Managing Partners and available for review and download.
We have been investing our own funds following the "Ten Commandments" since 2011, consistently generating yields of 10% and above. The hurdle rate of the BVIP is 8%. Our January performance was 2.88%.
We are having a substantial part of our own net worth in the BVIP. Protecting our joint capital at all times is hence top priority. We are in this for the long-term and see ourselves in a true partnership with our investors.
The Managing Partners of Bernstein have each been in the banking and investment industry for more than 20 years. Both have become reasonably affluent in this process. Most of their net worth had naturally been generated by compensation for their work, rather than investment returns.
Theoretical and empirical foundations of the BVIP Investment Principles
Understanding Benjamin Graham
Before meeting at Bernstein coming from different directions in 2008, the success in their individual investments was actually quite mediocre, to say the least. The breakthrough in their investment approach and subsequently performance can initially be attributed to the lecture (and understanding!) of one well-known and two rather unknown books on investing as well as reading all the annual letters written by Warren Buffett to the shareholders of Berkshire Hathaway:
Reading the Warren Buffett letters
- The Intelligent Investor by Benjamin Graham, first published in 1949
- The Options Edge by William R. Gallacher, first published in 1998
- The Complete Guide to Option Selling by James Cordier, first published in 2004
- Berkshire Hathaway Shareholder Letters, beginning with 1977
The key elements of these references combined with hands-on investing experience of their own funds have been condensed into the foundation of the investment philosophy of Bernstein termed rather frivolously (we would take that hit) “The 21st Century Intelligent Investor Commandments”.
Risk-conscious, smart use of derivatives
The labeling notwithstanding, we are absolutely serious and thoroughly convinced of the validity of these principles. Applying them has yielded – despite frequent set-backs and lapses – double-digit returns of our investments ever since we started in 2008.
In essence, the strategy combines time-tested principles of value investments with international diversification, income enhancements and hedging elements using derivatives within a disciplined, long-term oriented framework.
Investment Approach and Horizon
Interested investors are encouraged and should feel free to test and implement these principles themselves and become successful long-term investors (rather than mere Speculators) on their own. Implementing all the elements is not entirely trivial but it can be done, so we would congratulate you to such a move.
Investors who prefer to benefit directly from applying our investment principles should join us as investors in the Bernstein Value & Income Portfolio (“BVIP”). The investments can be either effected as one-off payments or (resonating well with a cornerstone of our investment philosophy) monthly investment contributions. (Details on the straightforward technical & legal implementation can be found here: Legal & Other Unavoidable Technicalities)
What we are looking for is a long-term investment partnership with likeminded people and institutions. That means we are in the same boat as you, continuing to allocate a major part of our liquid assets to the BVIP.
Costs & Fees
Carry of 20% above 8% hurdle rate
There is only one way in which we are different as investors than you: 20% of any returns on the funds invested in the BVIP exceeding the hurdle rate of 8% per annum, calculated over a five year period, will accrue to us. We will receive neither an annual management fee nor any other compensation for managing the BVIP. Please check additional information and sample calculations on this approach here: "Allocation of profits & costs"
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Subscription & next steps
BVIP Investment Agreement
BVIP Investment Agreement for Companies
BVIP joint investment
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Bernstein Value & Income Portfolio ("BVIP")