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How the 0.001% invest

economist.com

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Re: How the 0.001% invest

#61

Post by thomas93 »

peteretep wrote: post #52
lordnacho wrote: post #49

The family offices I've worked with do pretty much everything. Part of the reason to do everything is that you have the freedom to do so. I literally called a friend on behalf of another friend to get him a bridge loan for a house once. A free mandate makes for more interesting work, plus as the manager you can stick things in illiquids that have no mark-to-market. That's the uncharitable view, of course. The charita…

The SEC remedy against bad hedge fund owners in the show Billions is the threat of turning them into family offices

This actually happened in real life to Steve Cohen (the person Axelrod's character is loosely based on).

After being banned from managing outside capital, SAC Capital Advisors transitioned to being a family office called Point72. Only recently has it begun to to manage outside capital again.

Re: How the 0.001% invest

#62

Post by mruts »

potatofarmer45 wrote: post #42

I've worked for a family office in Hong Kong. What was really telling for me was how the rate of return KPI was measured. We were not benchmarked against the S&P 500, or any index. We were measured directly against the fund of another frenemy family. So long as the fund outperformed the other family, all was good. It's crazy because you could be underperforming treasury bonds, and still be good because the other offi…

I've seen the portfolio's of dozens of family offices (I worked at a portfolio analytics company so I had free reign to snoop around), and none of the offices seemed competent. The returns were terrible and the portfolio construction laughable.

Instead of striving for out performance, the funds just catered to the whims and idiosyncrasies of the family. Also, many of these funds were too small to make sense, AUMs from like 150MM-500MM. They would have be much better off just investing in a hedge fund, but the family's ego didn't allow them. I think the point was to show off more than anything else.

One of the exceptions was Sergey Brin's family office, which managed a shit-ton of money and had some good people who actually knew something about portfolio construction.

Re: How the 0.001% invest

#63

Post by klaudius »

adventured wrote: post #43
nly wrote: post #25

The article only considers new investment. Jeff Bezos may be worth $150bn, but approximately $125bn of that is in Amazon stock. He's 80% invested in Amazon. Does it really matter where the worlds richest man puts the other 20% when he could afford to lose it all on moonshots and not give a damn? The risk-reward trade-offs you and me make while investing just don't apply to Jeffs personal investment decisions, and the…

His wealth concentration is actually quite higher, around ~94.7% in AMZN stock. Bloomberg has him currently at a $132b net worth, with $125b in Amazon. The rest is Blue Origin and The Washington Post, with his cash position at 'only' an estimated $2.45b. Given the absurdly high valuation of Amazon - and as a fan of humanity pushing into space - I'd like to see him sell some larger blocks of Amazon while the stock mar…

Don't forget GOOG stock (https://www.growthink.com/content/story-jeff-bezos%E2%80%99-...).

Re: How the 0.001% invest

#64

Post by j1vms »

hal-9-000 wrote: post #51
adventured wrote: post #43

Earlier quoted context omitted.

His wealth concentration is actually quite higher, around ~94.7% in AMZN stock. Bloomberg has him currently at a $132b net worth, with $125b in Amazon. The rest is Blue Origin and The Washington Post, with his cash position at 'only' an estimated $2.45b. Given the absurdly high valuation of Amazon - and as a fan of humanity pushing into space - I'd like to see him sell some larger blocks of Amazon while the stock mar…

I'm not so sure if he could easily liquidate larger block of stocks without affecting price/panic much. Maybe in long period of time by periodically selling minor amounts. Amazon is Jeff and Jeff is Amazon, I wonder what would happen and how markets would react if he disclosed even slightest hint of his exit intentions. Also fan of humans conquering space though, and would definitely love to see that happen.

> Amazon is Jeff and Jeff is Amazon

True, and a scary thought for any heavy investors. That's why a company that size needs to have a publicly known succession plan given current valuation. There are people at Amazon who could take over but no one whom the market would trust with taking the reigns, right off the bat.

Re: How the 0.001% invest

#65

Post by mruts »

ThrustVectoring wrote: post #39

Back when I was fantasizing about what I'd do if I won the lottery, I looked into family offices a bit and concluded that there's basically no point as far as the investing advice goes. It's still likely a good idea for some of the ultra-wealthy for estate, tax, and philanthropic purposes, but on the investment side? The standard passive indexing approach used by middle class individuals scales in a cost-effective ma…

If I was a billionaire, I would be very very nervous just dumping my billions in a S&P 500 ETF. At that level of wealth, you really ought to have a portfolio manager who can slice and dice your exposure in advantageous ways.

I don't think active management makes sense for the majority of folks, but billionaires are exactly the kind of people that it does make sense for. With a billion or two you can probably get yourself into some pretty good closed-end funds (if you're savvy about it) that will probably deliver better risk adjusted returns than vanilla passive.

Personally, if I had the money, I would go with 2 Sigma or AQR. Both of their past returns streams are stellar and uncorrelated with the markets.

Re: How the 0.001% invest

#66

Post by CompelTechnic »

ThrustVectoring wrote: post #39

Back when I was fantasizing about what I'd do if I won the lottery, I looked into family offices a bit and concluded that there's basically no point as far as the investing advice goes. It's still likely a good idea for some of the ultra-wealthy for estate, tax, and philanthropic purposes, but on the investment side? The standard passive indexing approach used by middle class individuals scales in a cost-effective ma…

There is one point you haven't considered: Even though a pure indexing strategy is appropriate, it is not appropriate to use Vanguard for this. At the billion-dollar level, assuming that the index funds had an expense ratio of .05% (among the lowest out there) you would be paying annually:

1,000,000,000*.0005 = $500,000

For that level of expense, you could instead have a one-man office or other service provider that can buy the individual stocks comprising (or closely approximating) the index, and not have to pay any expenses other than his salary and trading costs. Meanwhile he can provide tax planning/philanthropic services as well.

Re: How the 0.001% invest

#67

Post by mruts »

Blackstone4 wrote: post #35

The majority of the world's richest people have their wealth tied up in companies they either founded or inherited.... if they are investing their capital they have limitations most of us do not have to face. If I go from having to invest $1m to $100m to $100bn, my investment universe shrinks each time. For example, a small investor can invest in companies with market cap of ~$50m+....not possible for Warren Buffet.…

On the other hand, if you don't have a lot of money, many investment strategies become infeasible. The move from 1mm to 100mm would definitely increase your investment universe, not decrease it. With 100mm you can do private equity, VC, debt, illiquid and obscure stuff, EM bonds, etc etc. Most of that you can't do with 1mm. But you are right that going from 100mm to 100bn definitely shrinks your universe.

Re: How the 0.001% invest

#68

Post by whitepoplar »

mruts wrote: post #62
potatofarmer45 wrote: post #42

I've worked for a family office in Hong Kong. What was really telling for me was how the rate of return KPI was measured. We were not benchmarked against the S&P 500, or any index. We were measured directly against the fund of another frenemy family. So long as the fund outperformed the other family, all was good. It's crazy because you could be underperforming treasury bonds, and still be good because the other offi…

I've seen the portfolio's of dozens of family offices (I worked at a portfolio analytics company so I had free reign to snoop around), and none of the offices seemed competent. The returns were terrible and the portfolio construction laughable. Instead of striving for out performance, the funds just catered to the whims and idiosyncrasies of the family. Also, many of these funds were too small to make sense, AUMs fro…

My guess is that most UHNWIs would do better to simply park their money in Vanguard index funds and call it a day.

Re: How the 0.001% invest

#69

Post by code_duck »

ascar wrote: post #38
emn13 wrote: post #33

Earlier quoted context omitted.

As that wiki link points out, wealth isn't entirely public or measurable; so the list isn't complete. It explicitly excludes dictators and royalty (so, hey, saudi family!), and " excluding and ranking against those with wealth that is not able to be completely ascertained" That makes perfect sense of course; but all those excluded parties from that ranking still need to manage wealth, so getting exact or even estimat…

> If there are several individually wealthy family members it's probably more likely due to dilution. While this is probably true in general, there are at least two famous exceptions from Germany. There is the notable case of Adolf "Adi" Dassler, founder of Adidas, and his older brother Rudolf Dassler, founder of Puma, who separated from their joined shoe manfucaturing business and independently built two of the larg…

In both of those instances, wasn’t there onebusiness that they split into two? That’s still one source of wealth. They just divided it earlier than death.

Re: How the 0.001% invest

#70

Post by comboy »

blazespin wrote: post #41

After some small amount (5 million?) you are less interested in capital growth and more interested in protecting your capital. That’s what drives this the 0.001%

On the other hand, when you have $5M, you may want to protect it because if it goes down to $1M it makes a difference. For those ultra-wealthy though, if their wealth goes down 100x, it does not impact their comfort of living in any way. They just have less power.

I'm sure it still does not feel good psychologically so I'm not completely disagreeing with you.

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