The End of an Era for Value Investing?

Stefano Grasso, Portfolio Manager at Enhanced Value Fund, joins Guillaume Roux-Chabert to unpack Warren Buffett’s historic farewell letter, the legacy of value investing, and what Berkshire’s future means for investors. From humility and luck to executive pay and dry powder challenges—this episode is a masterclass in perspective.

Guillaume Roux-Chabert  

Hello and welcome to our podcast. This is Guillaume Roux-Chabert from Interactive Brokers Singapore. I’m joined today by special guest, Stefano Grasso, the Portfolio Manager for Enhanced Value Fund.

So indeed, there’s a massive event that happened in the financial industry with a last letter from Warren Buffett. So of course, who is better than Stefano to talk about it? A great fan of Warren Buffett. We had a couple of podcasts together about, about Warren Buffett, his philosophy and everything.

And I wanted to have a bit like your opinion and what you think about this this letter and then the legacy of course Warren Buffett. Stefano, we have this historic letter in front of us, indeed, like the 10 of November 2025. Warren Buffett is officially going quiet, handing the reins to Greg Abel. So, you build the Enhanced Value fund strategy with a lot of Buffett’s DNA in it. And when you read this opening line, I will no longer be writing Berkshire annual report. What went through your mind regarding the future of value investing?

Stefano Grasso  

It was deeply emotional. Buffett letters have been a public good for decades and a guidance force for me. The first blow actually was Charlie Munger passing in 2023. The second, as you said earlier this month we are recording was his announcement to stop writing the annual letters. At 95, he steps back.

His final letter is a masterclass in perspective creating his success not just to genius, but to the starting line. Born in 1930, healthy, reasonably intelligent white male, and in America. He’s giving a lot of emphasis on the casualty of where and when he was born. He reminds us kindness is costless, but also priceless.

And the gain, you can see value here, right? The spread between what it costs to be kind and nothing and what can give you in return, infinite. Keep in mind that the cleaning lady is as much as a human being as the chairman. In a era of personal brand inflation, and look at me leadership, this humility is the ultimate sign of strength in, in my view, studying his methods sparked my passion for value investing.

But the greatest lessons were never about PE ratios. They were about patience and integrity. He spent 60 years teaching the world how to compound money but his final chapter emphasizes more how to compound character and how he did that over time. It’s really a gracious exit from an undisputed legend.

You mentioned EVF and at Enhanced Value Fund, we launched our strategy and sympathy with these core values, precisely because they were fading in the industry. Investors are increasingly pushed into complexity excessive fees and narrative detached from fundamentals, meme coins and fashionable idea, you name them for EVF this is not the end of an era, is a reminder that true value investing becomes more relevant when the noise grows louder. So now is the great time for volume

Guillaume Roux-Chabert  

I see. So, let’s touch on this fascinating part of the letter you just mentioned now Buffett attributes his success to the ovarian lottery. He writes that he was born as a white male in America in 1930, and admits that in many other parts of the world, his life would’ve been miserable. So do you think he’s just like being humble or is there some kind of a lesson here?

Stefano Grasso  Buffett is unusually honest about the role of luck; being born in the right country, in the right family, with the right education, that honesty is part of his greatness. Many successful people I know are quick to spotlight their talents without acknowledging the massive, perhaps bigger than we want to omit the role that luck plays.

The deeper message is about systems here, markets reward talent, but they rewarded unevenly. Depending entirely on where you are and when you are born and when you enter the world. So it’s fascinating how an investor that has grown to, the top of the world in terms of success in investing, keeps being so humble and so rooted in one of his core beliefs that none of these would’ve happened if he were to have been born in a poor country in Africa or somewhere else, or at a different time in history or if the gender would’ve been different. He often talks about his sisters being as smart, probably smarter than him, but not having had the same opportunities. So, it’s sincere and it’s the point.

Guillaume Roux-Chabert  

Buffett spends a quite a surprising amount of his letter attacking modern. Executive compensation, it says that disclosure rules just produce envy, not moderation and fuel greed. So, as yourself, you are a money manager at looking at European and global companies, how do you protect your investors from CEOs who just want to get the look at me, rich.

Stefano Grasso  

This is something that he has discussed, multiple times in the last years, there has been a change in regulation to force for certain disclosure about CEO compensation. And this was probably the sharpest part of the letter, if you ask me is a long press point by Buffett.

Disclosure rules were meant to create transparency, but they became benchmarking tools that escalated pay without improving performance. The problem is today many compensation schemes incentivize short term action or earnings management over durable value creation. I can name many companies close to me where CEO pays as a reason in both bad times and good time despite, poor total return shareholders. So, he has this point about don’t just, make public the executive compensation because it only drive envy with one CEO with another and usually the board of directors are very easy to bend to increase the conversation, and there is an alignment to the top rather than an actual assessment of pay for performance.

For us at EVF at Enhanced Value Fund, the incentives are a fundamental part of the investment process. We look at pay, structure, equity, retention, and whether managers generally believe like owners. We actually want top managers to own Ideally a significant part of the company. If the incentives point in the wrong direction, the business is at risk regardless of how attractive it looks on paper so that’s very important. There are these two parts of the equation one is compensation, not at the benchmark you need to disclose doesn’t need to become a, an envy kind of venture. And on the other hand, you want the management to be incentivized not just on how much money milk out of the company, but you want them to be incentivized to keep with the company.

Guillaume Roux-Chabert  

But let’s look forward, so Buffett says that Greg Abel will become the boss at year end, but without Warrens for folksy glue. So can Berkshire survive as a conglomerate, or do you expect a breakup to unlock value?

Stefano Grasso  

Look Abel has effectively been running the operating business for years now. He’s rational disciplined and culturally aligned. The challenge is not competence, it’s narrative pressure. Buffett presence was a global stabilizer. You could throw at him anything he could be underperforming for 1, 3, 5 years, and he just wouldn’t budge. Without him analyst will scrutinize every move, every acquisition, and every capital decision. Actually, recently in the last filing was revealed that Berkshire bought Google and you know, why now? And why not? In 2014 when I was discussing with them about some asset allocation initiatives. But anyway, how Berkshire is a decentralized structure and we remind in that way. Its durability never depended on one person, and that the secret to its future and the way it has been built. No breakup, that’s impossible under Greg, there will be no, breakup of different parts.

The strength of Berkshire is being in one single housing under one single roof, a number of different businesses with diversification and a lot of capital allocation flexibilities.

Guillaume Roux-Chabert  

So, let’s talk about the dry powder here. So, Berkshire is sitting on a massive cash pile of more than $300 billion, and Buffett notes that ideas are few because of the market levels right now, if the greatest investor in history can find ideas, how should normal investors do?

Stefano Grasso  

Let me say a couple of things here. One is, actually, let me start with an anecdote. In 2014, I was in Omaha at the shareholder meeting, and Berkshire had less than a hundred billion in cash and cash equivalent and I asked Buffett and Charlie Munger, why? Actually, I didn’t even ask.

I said, as a shareholder, I would be happier if you invest this money now, even if the valuation are not great, because the investment decision would’ve been made by you and whoever is going to be the next manager they will have as a mandate not to invest such a large amount of capital And I was even pushing, further saying, why don’t you take leverage? Why don’t you think you have 200 billion of cash you can easily take some debt on? And then the mandate for the next management is going to be to the leverage, which is much simpler mandate than finding opportunity to invest money. And here we are more than 10 years later, they didn’t listen. Berkshire has more than 350 billion. Buffett is handing over the helm to Greg Abel, and he’s facing a huge challenge to invest this money. Berkshire biggest primary challenge is scale. Deploying tens of billions require a very narrow universe of targets.

Most attractive opportunities today are smaller, more complex, or in sectors undergoing transition, where Berkshire cannot easily invest. I firmly believe there are a lot of opportunity in today’s market. Those are the ones that we are chasing at Enhanced Value Fund. But the thing is, we don’t need to write the 30 billion check to move the needle.

We can fish in ponds that are invisible to Berkshire. So, this is precisely why patient smaller allocators can outperform even giants because it’s, we’re not constrained byscience.

Guillaume Roux-Chabert  

So maybe one last question. Thinking about the future, so who according to you, would be your pick in the whole fun industry as a mentor that carries on Buffett’s legacy.

Stefano Grasso  

I think it, it’s a tough question and I think no one of the Buffett disciples would feel comfortable being named and that’s mainly because Buffett himself is a figure of humbleness. By definition, someone that could be named would probably feel uncomfortable because of this humble character that he probably is, I think, the other issue is it’s not just about, returns and long-term returns.

It’s about very stretched rationality, temperament, the ability to explain complex ideas with absolute simplicity. Multiple character traits, which very few investors embody. And I would say none embody all of them. But I can give you some names that I think. Are very valuable investors that we look up to.

One is Howard Marks and especially his memos are sporadic but outstanding in framing the current status of the economic effects. Another is Mohnish Pabrai, who he has been close to Munger and Buffett for decades. He’s in this business for a long time and he is very outspoken about how he’s coping and cloning some of the approaches of the very best.

Terry Smith, a very successful British growth investor, Seth Klarman, outer of the famous marginal safety and once was said by Buffett to be, potentially his successor. Tom Gayner runs Markel, which we also, full disclosure, have an investment, a position in Enhanced Value Fund. Honestly, I believe Buffett is unique and not repeatable by a single individual, but his thoughts live in many great investors and there is a big community that is going to carry forward his principles.

Guillaume Roux-Chabert  

And you embody that too dear Stefano. I’m looking forward to seeing how things are developing. Thank you for mentioning about all these great names too that was really insightful. Stefano Grasso, Portfolio Manager of Enhanced Value Fund talking to us about the last letter for Warren Buffett today.

Thank you so much and we really appreciate your time and your insight, and I look forward to having you back on the IBKR Podcast again. Thank you, Stefano.

Stefano Grasso  

Thank you. I enjoyed the speaking with you again.