Berkshire's Secret ETF Portfolio: A Value Investor's Guide to Buffett's Hidden Bets

While Warren Buffett's main Berkshire Hathaway portfolio is a concentrated collection of individual stocks, he also manages a separate, low-profile "secret portfolio." This fund, known as New England Asset Management (NEAM), is a subsidiary of Berkshire that Buffett acquired in 1998. As of the third quarter of 2025, NEAM managed $642 million in assets across 120 securities, and its holdings are filed separately in a quarterly 13F report.

The strategic rationale for this portfolio is clear and deliberate. It operates entirely independently of Buffett's primary $292 billion equity portfolio, which he has been actively trimming for years due to high market valuations. In fact, over the last three years, Berkshire has been a net seller of stocks, amounting to nearly $184 billion in net sales. The secret portfolio, by contrast, is a disciplined, low-cost diversification strategy that complements his core business model rather than departing from his value philosophy.

Its holdings-specifically the iShares Core MSCI EAFE ETF (IEFA), the Vanguard High Dividend Yield Index Fund ETF (VYM), and the iShares Core MSCI International Developed Markets ETF (IDEV)-are textbook examples of Buffett's principles applied to a diversified, passive framework. These are low-cost, broad-market ETFs that target developed international equities and high dividend yield. They provide exposure to a wide array of stable, first-world economies while maintaining a margin of safety through diversification and low expense ratios. This approach is a direct counterpoint to the concentrated, high-valuation stock sales in the main portfolio, representing a tactical shift toward global diversification and income generation.

The bottom line is that this secret portfolio is not a departure from Buffett's philosophy, but a sophisticated application of it. It uses the scale and resources of Berkshire to implement a passive, diversified strategy that aligns with his long-term view of market cycles and risk management. It is a quiet, disciplined bet on global markets and dividend resilience, operating in the background as a counterbalance to the more active, value-driven stock picking in his main portfolio.

Valuation and Market Context: Why These Holdings Now?

The market backdrop for these specific ETFs is one of extreme valuation in the home market. Berkshire Hathaway's decision last year to sell its entire position in S&P 500 ETFs by the end of 2024 was a stark signal. This move came as the S&P 500's Shiller CAPE ratio approached 40, a level signaling that stock prices were trading at a premium to historical averages, heavily driven by the tech sector. For a fund of Berkshire's size, this was a disciplined act of locking in profits and rotating into defensive instruments, a strategy that makes perfect sense in a high-valuation environment.

Against this backdrop, the secret portfolio's focus on international developed markets-through holdings like iShares Core MSCI EA (IEFA) and iShares Core MSCI International Developed Markets (IDEV)-provides a logical, defensive diversification. These ETFs target countries with stable currencies and political environments, separating investors from the risks of emerging markets while still capturing global growth. The portfolio's allocation to these funds, which have outperformed the S&P 500 year-to-date, is a tactical move to reduce concentration in the overvalued U.S. index.

The inclusion of the Vanguard High Dividend Yield Index Fund ETF (VYM) adds another layer of Buffett-aligned discipline. Its ~2.4-2.6% yield offers a tangible return stream, a key component of Buffett's investment thesis. In a market where future growth is already priced in, this yield provides a tangible cash flow, acting as a buffer against volatility and a source of income regardless of market direction. It's a classic example of seeking value and yield, not just growth, in a premium market.

The bottom line is that these holdings represent a portfolio in transition, moving capital from a market deemed expensive toward assets with more attractive valuations and yield profiles. It's a defensive reallocation, not a retreat from equities, but a bet on diversification and income in a high-valuation climate.

Financial Impact and Portfolio Positioning

The holdings in question are part of a separate, smaller portfolio managed by New England Asset Management (NEAM), a subsidiary of Berkshire Hathaway. This portfolio is a distinct entity from the conglomerate's main marketable equity holdings. The three ETFs-IEFA, VYM, and IDEV-collectively represent a small, concentrated portion of NEAM's overall assets, with the largest holding, IEFA, accounting for just 6.37% of the portfolio (valued at $48.7 million). This is a fraction of the scale of Berkshire's primary investment strategy.

This positioning stands in stark contrast to the broader Berkshire structure. While NEAM's portfolio seeks income enhancement from stable, high-yield companies, the main Berkshire portfolio has been in a state of net reduction for over three years. Warren Buffett has been a net seller of stocks for 12 consecutive quarters, amassing a record $339.8 billion in cash, cash equivalents, and short-term investments. This massive cash hoard, which exceeds the entire market value of the main equity portfolio, reflects a deliberate strategy of de-risking and waiting for valuation opportunities. The ETF holdings in NEAM are consistent with a Dividend Select Equity strategy, focused on generating income from developed markets and high-yield U.S. stocks, rather than the aggressive capital deployment or deep value hunting seen in the main portfolio.

The financial impact of these ETFs on Berkshire's overall capital allocation is negligible. They are a tactical, income-oriented component of a larger advisory business, not a core driver of the company's cash flow or strategic direction. Their role is to provide diversified, low-cost exposure to international and dividend-paying equities for NEAM's clients, aligning with a specific investment mandate rather than Berkshire's overarching cash preservation and value creation goals. In essence, these holdings are a small, income-focused experiment within a much larger, cash-heavy fortress.

Catalysts, Risks, and What to Watch

The strategic rationale for Berkshire Hathaway's hidden ETF portfolio is straightforward: it's a tactical hedge against a market priced for perfection. The primary catalyst for its relative performance is a sustained market correction or a rotation out of expensive U.S. equities. With the S&P 500's cyclically adjusted P/E ratio hovering near 40.7, the portfolio's international and dividend-focused tilt provides a natural diversification buffer. A shift in sentiment away from the concentrated tech-driven rally would likely boost the performance of funds like the iShares Core MSCI EAFE ETF (IEFA) and the Vanguard High Dividend Yield Index Fund ETF (VYM), which are core holdings in the secret portfolio.

The key risk, however, is scale. This is not a core investment thesis for Berkshire; it's a small, tactical diversification. The portfolio's total assets under management are $642 million, a fraction of the firm's $292 billion main portfolio. Its impact on Berkshire's overall returns is negligible. This means the portfolio's moves are driven by its own risk management and valuation discipline, not by a fundamental bet on international markets or dividends. It's a defensive positioning, not a growth engine.

What investors should watch is the portfolio's own evolution. The most direct signal is in NEAM's quarterly 13F filings. The portfolio has been a persistent seller of high-growth tech stocks, including a decline of 83% in its Alphabet position over 15 months. Any significant shift in these holdings-either a large-scale rebalance or a new allocation to a different region or style-would be a clear read on the portfolio managers' changing view of risk and opportunity. For now, the consistent increase in holdings like IEFA and IDEV suggests a deliberate, patient tilt toward developed international markets.

More broadly, track the performance of the underlying indices against the S&P 500. The portfolio's success hinges on its ability to outperform in a market where U.S. large caps have dominated. If the MSCI EAFE and FTSE High Dividend Yield indices begin to lag the S&P 500 significantly, it would challenge the portfolio's defensive thesis. Conversely, a sharp divergence in the other direction would validate the tactical move. The watch is on both the portfolio's trades and the broader market's direction.