The Ten Commandments of Investment Management – Mohnish Pabrai October 2018 Talk

Here at Canadian Value Investors we are big fans of Mohnish Pabrai.

In October of 2018 Mohnish Pabrai gave a talk at Professor Arvind Navaratnam’s class about the Ten Commandments of Investment Management. This is the first time Mohnish has given this talk where he outlined his money management principles. He notes that most participants in the investment management business violate these commandments.

We have summarized his talk to give you a quick reference point to review.

Commandment One: Thou shall not skim off the top

-Skimming is taking some percentage of fees as a fixed fee and in the case of hedge funds typically 1-2% off the top and an additional performance fee.

-Two of the original practitioners were Warren Buffett and Charlie Munger, who practiced the art with no fees off the top. Buffett once he merged his partnerships was 0-6-25 where he took no fees off the top, and instead received 25% of any return over a 6% annual return hurdle. Mohnish believes Charlie Munger was 1/3 of return over 0% but it was a special kind of operation.

-Practice the art with your own assets. With the power of compounding even a small amount of money will become significant over a few years. If you are compounding at anything north of 15-20-25% which you should be able to do with small amounts of capital, your money will be doubling every 4-7 years. This then gives you the ability to in effect live off that base while the assets are growing.