The Berkowitz breakaways: Two Fairholme Fund managers flee

Veteran portfolio managers Larry Pitkowsky and Keith Trauner have “put the band back together” in the form of Goodhaven Capital Management LLC. After spending most of the last decade helping Bruce Berkowitz manage the $17 billion Fairholme Fund Ticker:(FAIRX) at Fairholme Capital Management LLC, Mr. Pitkowsky and Mr. Trauner will start managing money at their own firm within the next few weeks. Their investment strategy is expected to be similar to that of Mr. Berkowitz, who was recently named equity manager of the decade by Morningstar Inc. for the performance of the five-star rated fund. Goodhaven will start by managing separate account portfolios for a $1 million minimum, but the plan is to launch a mutual fund version of the strategy within the next six months. One major difference between the Fairholme Fund and Goodhaven will be its ability to invest in smaller companies, something a fund the size of Fairholme has difficulty doing. Like Fairholme, the Goodhaven strategy of value investing will include highly concentrated portfolios, according to Mr. Pitkowsky. The mutual fund portfolio will hold between 15 and 20 stocks, he said. And in the separate account, there will be between 10 and 15 positions. “As we’ve been laying the groundwork recently, we see plenty to look at in the smaller and mid-cap areas,” said Mr. Pitkowsky, 46, who is co-founder, co-manager and co-general partner of the new firm along with Mr. Trauner, 53. Mr. Pitkowsky refused to discuss specific investments or categories that he finds attractive beyond saying, “We will have a big universe to pick from because we will be managing a modest sum of money for a while.” Goodhaven will launch with the support and a “significant minority investment” from Market Corp., a $10 billion specialty asset management firm.