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‘Backed up the truck and committed murder’

In the early 2000s, Warren Buffett’s longtime business partner Charlie Munger made an unexpected decision. He handed over nearly $90 million of his family’s fortune to a 38-year-old investor named Li Lu.

At the time, Li was a rising star in the investment world, often referred to as the “Chinese Warren Buffett.” What followed was remarkable. That initial investment grew to approximately $400 million, showing how successful that decision was.

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Li Lu, the founder of Himalaya Capital, had a reputation for applying Ben Graham’s value investing principles, similar to Munger and Buffett. Instead of focusing on the crowded US market, Li turned his attention to Chinese stocks, where he saw enormous potential. Munger once noted, “We’ve had unholy good returns for a very long time,” reflecting on the success of his decision to entrust Li with his family’s wealth. Munger noted that the initial investment of $88 million had grown four or five times.

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One of Li’s most notable moves was his early investment in Kweichow Moutai, a spirit brand that became China’s national drink after the communist revolution. Li saw its potential while it was trading cheaply, at just four to five times earnings. He went all in and bought as many shares as possible – a decision that paid off immensely when Moutai became one of China’s largest listed companies. In an article in the Financial Times, Munger praised Li’s foresight: “He just backed up, bought everything he could and made a killing.”

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Li’s relationship with Munger goes beyond just money management. At a 2019 meeting of the Daily Journal Corporation, Munger reflected on how rare it was to trust an outsider with his money, saying, “I’m 95 years old. I gave Munger money to an outsider just to once to get started in the 95 years. That is Li Lu.” Munger saw something unique in Li: a combination of strategic thinking and the ability to seize opportunities that others might overlook.

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Li’s investment journey has not been without challenges. He fled China after the Tiananmen Square protests and eventually found refuge in the US, where he earned a degree from Columbia University. His early struggles shaped his investing philosophy, but what set him apart was his ability to turn adversity into opportunity. Despite the obstacles, Li built Himalaya Capital into one of the most successful China-focused investment funds, headquartered in Seattle.

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Li often praised Munger’s mentality, saying that even in the face of challenges, Munger never seemed pessimistic or defeated. He admired Munger’s ability to remain rational and calm, and embodied the Chinese proverb: “One should not rejoice over external gains nor be sad over personal losses.”

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Under Munger’s leadership, Li reorganized his fund and eliminated many of the shortcomings typical of hedge funds. This allowed him to focus on long-term investments without the constant pressure to show monthly returns. From 2004 to 2009, Li’s fund achieved a compound annual growth rate of 36%; in twelve years the capital grew more than twenty times.

The collaboration between Charlie Munger and Li Lu is a great example of what can happen when trust and shared values ​​come together in investing. Munger’s choice to entrust a significant portion of his family fortune to Li Lu, an “outsider” by most standards, may have seemed like a gamble to some, but it turned out to be a brilliant move. Their collaboration emphasizes that true success goes beyond simply crunching numbers: it’s about taking a long-term view and trusting the right person to steer the ship.

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This article Charlie Munger Gave His Family Fortune To ‘Chinese Warren Buffett’ – He Made It $400 Million: ‘Backed Up The Truck And Made A Killing’ originally appeared on Benzinga.com

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