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How the 0.001% invest

economist.com

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Re: How the 0.001% invest

#111

Post by lexs »

gberger wrote: post #107
barrow-rider wrote: post #103

Earlier quoted context omitted.

Depends on risk tolerance and how flashy they want to be. Donald Trump, if his public finances are to be believed, would have roughly the same net worth had he just invested the money his dad gave him in mutual funds. Instead he managed to create a series of failing companies and questionable ties... but managed to live the high life and stamp his name on bloody everything.

Wait, you're telling me he could have turned $1M into $3B just through investing in mutual funds?

$1M as "small loan" in 1968, then becoming president of his fathers real estate company 1974 (shares divided among Donald Trump and his 4 siblings) estimated at $200M ($40M for him but not liquidated at that point), and then inheritance from his father in 1999 estimated between $20M and $300M. Slightly more than the infamous small $1M loan then.

Re: How the 0.001% invest

#112

Post by dgudkov »

I struggle to understand the point of the article.

>Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked.

OK. Rich clients were not happy with the way external managers managed their funds and decided to do it themselves. I get it.

>As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power and feed inequality.

How on Earth is it related to populism?

>Family offices have created inequality.

If the author's explanation of what family offices are is correct, they didn't create inequality. If you take your money from a deposit and decide to invest yourself you don't create inequality. You undertake higher risk and potentially receive higher award.

What's the point of the article?

Re: How the 0.001% invest

#113

Post by tivert »

CompelTechnic wrote: post #66
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…

> 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.

But then you have to trust that guy not to fuck it up, while Vanguard has a stellar reputation and a whole office of people making sure things go as expected.

Re: How the 0.001% invest

#114

Post by diminoten »

WhompingWindows wrote: post #92
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…

It's extremely interesting - you're not interested in the investments of someone who buys investigative journals and makes rocket/space exploration companies? While these may be little side-projects to you and Jeff, to the rest of us they are very very important.

Why are they very very important? Not the companies, but the fact that Jeff Bezos in particular has invested in them; what's "very very important" about that?

Do you think these companies wouldn't exist or be as capable without Bezos? Why do you think that?

Re: How the 0.001% invest

#115

Post by golergka »

dgudkov wrote: post #112

I struggle to understand the point of the article. >Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked. OK. Rich clients were not happy with the way external managers managed their funds and decided to do it themselves. I get it. >As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power…

Rich people bad.

Re: How the 0.001% invest

#116

Post by alehul »

barrow-rider wrote: post #103
whitepoplar wrote: post #68

Earlier quoted context omitted.

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

Depends on risk tolerance and how flashy they want to be. Donald Trump, if his public finances are to be believed, would have roughly the same net worth had he just invested the money his dad gave him in mutual funds. Instead he managed to create a series of failing companies and questionable ties... but managed to live the high life and stamp his name on bloody everything.

To offer a better and less political answer: the reason that an UHNWI doesn't park their entire net worth in an index fund is because there is some probability, however minute, that the markets will collapse and never recover.

Additionally, we could say that success in active investing is (often) a function of how much you're willing to spend to find the right opportunities. For an UHNWI, this is likely enough to beat the market, especially if a high percentage of investors are passive, leaving more opportunities for corrections open.

As another commenter said, the goal is usually to avoid becoming poor first and foremost, rather than becoming richer.

Re: How the 0.001% invest

#117

Post by lixue »

gberger wrote: post #107
barrow-rider wrote: post #103

Earlier quoted context omitted.

Depends on risk tolerance and how flashy they want to be. Donald Trump, if his public finances are to be believed, would have roughly the same net worth had he just invested the money his dad gave him in mutual funds. Instead he managed to create a series of failing companies and questionable ties... but managed to live the high life and stamp his name on bloody everything.

Wait, you're telling me he could have turned $1M into $3B just through investing in mutual funds?

Assuming a 10% return, which is about the max I could find for a single fund over 20 years, it'd take 84 years to turn $1M in to $3B.

Conversely, plenty of funds do 15-20% in the short term. 15% only takes 57 years, and 20% brings it down to 44.

So, doable, but you'd be considered a pretty amazing investor. And this all assumes the money was invested from the day he was born.

Re: How the 0.001% invest

#118

Post by smolder »

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…

How do you cope with that? That people whose financial decisions involve 100s-of-poor-people-lifetimes levels of money are still so irrational in their motivation?

Re: How the 0.001% invest

#119

Post by pbhjpbhj »

dgudkov wrote: post #112

I struggle to understand the point of the article. >Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked. OK. Rich clients were not happy with the way external managers managed their funds and decided to do it themselves. I get it. >As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power…

>If the author's explanation of what family offices are is correct, they didn't create inequality. If you take your money from a deposit and decide to invest yourself you don't create inequality. //

If you can afford to invest, and do so successfully, you therefore make money from others labour. As poor people can't do that, any successful investment is contributing to wealth inequality.

In general, if you win on investments someone else is losing.

This means that if having large capital base means you have accessv to better investments - eg avoiding large fees - then you'll drive more inequality.

To recapitulate: There's only a certain amount of wealth generated, if you receive "higher reward" without doing more wealth generation then those generating the wealth are getting a smaller proportion.

Re: How the 0.001% invest

#120

Post by cascom »

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…

What you are missing is that family offices usually farm out most of their vanilla public market securities portfolios to people like vanguard, but that 1/2 to 1/3 of the portfolio is private or alternative investments and that is where the investment team spends a great deal of time. Additionally, a lot of the "team" is often focused on things like reporting, tax, estate planning etc.
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