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How the 0.001% invest

economist.com

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Re: How the 0.001% invest

#151

Post by buzer »

savanaly wrote: post #106
Gustomaximus wrote: post #79

Earlier quoted context omitted.

A friend of mine who manages ultra wealth people said most people who turn up don't say "How much can you make me" but say "Can you make sure I'm never poor". It's often about preservation of wealth more than gains for these people. That said I've discussed some returns they make and it's incredible. I don't want to say what I recall, as it was a couple years back and it sounds like an exaggeration. They said this is…

>They said this is partly because they get access to deals that don't hit the wider market and you need serious cash to get in the room to have that chat. This is something I hear a lot and I just don't get. Are the people on the other side of those deals just...not greedy? After all, you are implying that the deal has better expected returns than what people are buying on margin in public markets, so why doesn't the…

I imagine there can be some deals that people don't really want to make public even if they aren't strictly speaking illegal.

One such a deal that surfaced somewhat recently was that cum-ex trading. If you put that in the public market, you would essentially be killing the goose that's laying golden eggs since there would be outcry to make it illegal. If instead you just offered it to select few (people with enough capital & no moral qualms about using it), you could keep it under the wraps for longer time and get better long term return.

Re: How the 0.001% invest

#152

Post by jjeaff »

lixue wrote: post #117
gberger wrote: post #107

Earlier quoted context omitted.

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.

Except the premise is in accurate. He wasn't left with $1m. He was left with hundreds of millions in cash and cashflowing assets. Had he invested $250mm in the markets back then, he would be much ticket today.

Re: How the 0.001% invest

#153

Post by [deleted] »

shaki-dora wrote: post #82
pjc50 wrote: post #40

Earlier quoted context omitted.

Thanks for voluntarily withdrawing this.

Yet even now the removal message refers to it as a “fun” fact, making me somewhat less enthusiastic about OP’s moral compass. Although, I guess, in the best possible light, and some squinting, one could consider this an artifact of inelegant phrasing, or anchoring on whatever the post previously said. Then again, when first told of the true nature of their post, the instant reaction was to defend it with pretend igno…

[deleted]

Re: How the 0.001% invest

#154

Post by jandrese »

dgudkov wrote: post #139
drewrv wrote: post #129

Earlier quoted context omitted.

At a micro level, taking money out of a deposit and investing it does not create inequality. At a macro level, the fact that simply having wealth begets more wealth in a way that labor cannot accomplish is a driving force behind inequality.

>simply having wealth begets more wealth It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.

> Many rich people lose their fortunes.

Up to a point. The ultra-rich have so much money now that it would take a monumental disaster for them to become poor again. IIRC only one person in history has ever stopped being a billionaire: J. K. Rowling, and that was due to enormous philanthropic giving.

Mere millionaires come and go, but once you're talking hundreds of millions the positive feedback loop of capital makes it difficult to lose everything.

Re: How the 0.001% invest

#155

Post by ThrustVectoring »

cascom wrote: post #120
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.

Yeah, what I'm saying is that you probably want to farm out 100% of the portfolio to someone like Vanguard.

Re: How the 0.001% invest

#156

Post by magicnubs »

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?

According to the NY Times, he actually received $413 Million

https://www.nytimes.com/interactive/2018/10/02/us/politics/d...

Where's the $3 billion number coming from?

Re: How the 0.001% invest

#157

Post by ThrustVectoring »

thesausageking wrote: post #126
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…

> The standard passive indexing approach used by middle class individuals scales in a cost-effective manner to the billions of dollars of assets Family offices are more like endowments and follow similar strategies that will have a portfolio that includes a mix of public equities, bonds, private equity, hedge funds, and real estate. Many of these investments are illiquid and have long holding periods, so aren't avail…

>Many of these investments are illiquid and have long holding periods, so aren't available to normal investors but can provide much better returns than index funds.

They can also provide worse returns. You don't know which. You can guess that they'll provide average returns, because the average investment gets average returns. After all, not everyone can be above average.

Passive indexing guarantees average returns. Before costs, that is. So not only is the indexing approach cheaper, but it's also safer.

>In addition, when you have >$100m in wealth, consistent, predictable returns become very important and index funds don't give you that.

Quite the opposite, IMO. If you do something straightforward like dump 100% of that into the S&P 500 and spend the dividends, you're looking at something like $1.8 million this year. Less in a downturn, of course, but that's still pretty difficult to spend.

And if you have known large expenses, fixed income is really efficient at guaranteeing you the money needed to meet those expenses.

Re: How the 0.001% invest

#158

Post by thaumasiotes »

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.

> 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.

There was a factoid going around years ago that said Donald Trump's net worth was equal to the value of his inheritance if it had been invested in an index fund.

But note that under that hypothetical, he never would have spent any of it. Do you think the historical Donald Trump ever made any splashy purchases? Where did that money come from?

Having a high net worth while living the high life involves a lot more money than having a high net worth while living an ascetic life, and implies that his returns were a lot more than the index fund experienced.

Re: How the 0.001% invest

#159

Post by csytan »

dgudkov wrote: post #139
drewrv wrote: post #129

Earlier quoted context omitted.

At a micro level, taking money out of a deposit and investing it does not create inequality. At a macro level, the fact that simply having wealth begets more wealth in a way that labor cannot accomplish is a driving force behind inequality.

>simply having wealth begets more wealth It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.

Having more wealth gives you access to more efficient financial vehicles that generate (or maintain) wealth.

When you're poor, you are taxed:

- High interest loans

- Remittances with high fees e.g. with Western Union

- Using Cash (on average, you pay a tax on items which have the credit card fee priced in)

- Access to banking (low interest savings/checking accounts)

- Credit cards with high fees, low kickbacks

As you get wealthier:

- Credit cards with kickbacks (e.g. travel, cash back)

- Access to bank accounts with higher interest

- Access to international banking

- Access to international stock markets

As you get wealthier:

- Ownership of businesses which allow you to store your wealth without getting taxed

- Ownership of international businesses which allow you to find the best tax situation internationally

As you get wealthier:

- Access to private markets

- Ownership of businesses where you can directly partner with other businesses

- Running a financial institution

- Running a business so large that you can influence governments

- ...

Re: How the 0.001% invest

#160

Post by gnu8 »

throwizzle wrote: post #149
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…

A close friend of mine works for the Rothschild family office. He described to me how Lord R and his son don't see eye-to-eye on the family money. A lot of time has apparently been spent on reports making Lord R look better than his son at investing.

I am profoundly unable to take seriously anyone who calls themself a “lord”. What time period are these people from?
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