Billionaire Terry Smith lists 5 reasons why Warren Buffett’s success can’t be replicated

There will never be another Warren Buffett — not because of a lack of talent, but because the structure and environment that enabled his unparalleled investing success no longer exist, argues British fund manager Terry Smith, who is often dubbed “the English Warren Buffett” for his long-term, quality-focused investment strategy that echoes the investing style of the Oracle of Omaha.

In a sharp commentary for the Financial Times, Smith laid out five distinct advantages that made Buffett’s results at Berkshire Hathaway almost impossible to replicate.

1. The Munger influence and the power of float

While Buffett’s stock-picking prowess is widely acknowledged, Smith credits much of Berkshire Hathaway’s transformation to Charlie Munger, who helped shift Buffett’s focus from purely valuation-based investing to buying high-quality businesses. Munger also introduced Buffett to the concept of float — capital that is held temporarily before a future obligation is due.Buffett encountered float in two early investments: American Express, which held prepaid travellers’ cheques, and Blue Chip Stamps, an issuer of trading stamps that created a pool of upfront cash. “He also helped educate the Sage in the use of float,” Smith wrote, crediting Munger for reshaping Buffett’s investing foundation.

2. Leverage without debt

According to Smith, Buffett’s stock-picking acumen was amplified by leverage, but not through conventional borrowing. Instead, Berkshire used insurance float as a form of leverage. Starting with Geico, Buffett built a portfolio of insurance operations that provided upfront premium income for investment — as long as underwriting losses were controlled.“Float is another form of potential leverage — you can use the cash which you have in advance to invest,” Smith noted. On average, Buffett leveraged Berkshire’s portfolio by about 1.6:1, magnifying returns without incurring typical debt risks.

3. A closed-end structure with full control

Unlike open-ended funds that suffer from inflows and outflows at inopportune times, Berkshire Hathaway’s closed-end structure gave Buffett a critical edge. Unlike most open-ended funds that suffer from redemptions during downturns, Berkshire’s structure allowed Buffett to stay the course even during underperformance.

And because he held a controlling stake, he was immune to the pressures that other fund managers face during periods of underperformance.

“Given that even the best active managers experience periods of underperformance… Buffett never faced such problems,” Smith said. Buffett never faced external pressure to liquidate or change strategy, shielding him from short-term investor behavior that undermines long-term performance.

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4. A regulatory environment that no longer exists

Smith argued that today’s regulatory and market conditions would not allow another Buffett to emerge. “No one else will be able to replicate these advantages,” he said. Regulatory constraints make it unlikely that an investor could control an insurance company and invest its premiums in equities as Buffett did — a core driver of Buffett’s compounded returns.

Meanwhile, fund flows today overwhelmingly favour ETFs, which are liquid, subject to intraday flows, and managed under constraints that would have made Buffett’s long-term strategy untenable. “There is no chance that any of them would survive years of underperformance no matter how well founded their long-term strategy,” Smith said.

5. The dividend myth

Finally, Smith addressed a common misinterpretation of Buffett’s stance on dividends. “It is not true that Berkshire never paid a dividend,” he said, pointing out a 10-cent dividend issued in 1967. That payment, totaling $101,755, was never repeated. Had it been reinvested instead, Smith estimates it would be worth $4.8 billion today.

Buffett’s decision to stop dividends was rooted in the belief that distributing capital from a business compounding at 20% annually was, as Smith put it, “folly.” Yet the dividend narrative persists, despite Buffett’s clear demonstration of the superior power of reinvestment.

A model that can’t be rebuilt

Quoting Shakespeare’s Hamlet, Smith concluded: “I shall not look upon his like again.” While Buffett’s investment principles remain valuable, Smith asserts that his record is unrepeatable due to a combination of structural, regulatory, and strategic advantages that no longer align with how the modern investment world operates.

For Indian fund managers and retail investors inspired by Buffett’s legacy, Smith’s message is clear: learn the lessons, but don’t expect to follow the same path to the same result.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)