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How the 0.001% invest

economist.com

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Re: How the 0.001% invest

#211

Post by ThrustVectoring »

thesausageking wrote: post #208
ThrustVectoring wrote: post #157

Earlier quoted context omitted.

>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.…

> They can also provide worse returns. You don't know which. You do. That's the whole point. If you invest in a basket of top tier VC and PE funds, they will destroy indexes over the next 10 years. Yale is a great example of this; over the last 20 years their average returns are 12% which is 50% more than what an index did (7-8%): https://www.institutionalinvestor.com/article/b17qpx3nyyqywd...

>If you invest in a basket of top tier VC and PE funds, they will destroy indexes over the next 10 years.

I'd happily do a total-return swap of the S&P 500 against any basket of VC and PE funds you'd care to name that are currently accepting new investments. Assuming, of course, that there's some reasonable way of collateralizing and settling things at the scale I'm willing to risk ($10k notional), which I honestly doubt.

If beating the market was that easy, then everyone would do it. So either the top tier funds become closed to new investment after becoming top tier, or they stop over-performing for idiosyncratic reasons, or something. I'm using outside view logic here, I really don't care at all for the stories they tell. It's honestly downright dangerous to pay too much attention to the marketing material of investment funds - after all, Bernie Madoff consistently showed 11% annual gains. At the end of the day, the average investment must achieve average returns.

Re: How the 0.001% invest

#212

Post by superhuzza »

ars wrote: post #206
superhuzza wrote: post #174

Earlier quoted context omitted.

>that said Donald Trump's net worth was equal to the value of his inheritance if it had been invested in an index fund. Incorrect, it would have been worth substantially more, at about 13 billion (his current wealth is around 3-4 billion). So he still would have been able to spend billions and be further ahead than he is today. Source: https://www.forbes.com/sites/katestalter/2016/09/01/would-do...

You clearly did not read your own article. He would only be worth that if he was margined to the hilt. If he invested without margin then he would have made half of what he actually made. And that's without any spending at all.

First of all you're wrong, I did read the article. Secondly, the author directly addresses that point. He was leveraged when buying real estate too, so why not assume he would be leveraged up in the stock market? It's not an uncommon practice at all, and the comparison wouldn't make sense without factoring in loans.

Frankly I would have done the same, I think running a bunch of different businesses would be more stimulating than maximizing wealth through stocks. But objectively he's paid a financial price for that.

Re: How the 0.001% invest

#213

Post by ghostly_s »

cporios wrote: post #146
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…

I am honestly curious as to what you found confusing. I think it's fairly well structured and written. > How on Earth is it related to populism? A populist would generally be opposed to the concentration of wealth and power in a small subset of the population. Populism is on the rise today, as is the trend of family investment offices which are a result of concentrated wealth and power. Thus family offices are destin…

> A populist would generally be opposed to the concentration of wealth and power in a small subset of the population.

You (or the author of the full piece) seem to be describing Socialism. Populism is sometimes but not necessarily opposed to a wealthy elite, and the type of populism on the rise in the US and Europe seems generally to be a vague conception of a cultural elite, instead. Seems odd to bring into this discussion.

Re: How the 0.001% invest

#214

Post by philwelch »

spaceman_2020 wrote: post #210
philwelch wrote: post #184

Earlier quoted context omitted.

Trump's net worth is actually measurably lower than what his inheritance would have been worth if it were invested in index funds. Also, while some of Trump's lavish expenses are pretty much just lavish expenses (business jets and the like), some of his superficially ridiculous personal expenses, like gold-plating half of his entire penthouse apartment in Trump Tower[1], don't necessarily hurt his net worth that much…

Of all the very rightful criticisms leveled at Trump, ridiculing him for not putting his money into index funds is one of the worse ones. Building businesses is its own reward. People don't get it that just like painting or writing, people can get satisfaction from seeing a venture to completion or inking a good deal

And if he enjoys building businesses enough to make up for the massive opportunity costs for investing his money in Trump Steaks instead of index funds, that’s entirely up to him, but let’s not laud him as a business genius for it.

Re: How the 0.001% invest

#215

Post by thesausageking »

ThrustVectoring wrote: post #211
thesausageking wrote: post #208

Earlier quoted context omitted.

> They can also provide worse returns. You don't know which. You do. That's the whole point. If you invest in a basket of top tier VC and PE funds, they will destroy indexes over the next 10 years. Yale is a great example of this; over the last 20 years their average returns are 12% which is 50% more than what an index did (7-8%): https://www.institutionalinvestor.com/article/b17qpx3nyyqywd...

>If you invest in a basket of top tier VC and PE funds, they will destroy indexes over the next 10 years. I'd happily do a total-return swap of the S&P 500 against any basket of VC and PE funds you'd care to name that are currently accepting new investments. Assuming, of course, that there's some reasonable way of collateralizing and settling things at the scale I'm willing to risk ($10k notional), which I honestly d…

> If beating the market was that easy, then everyone would do it.

It's not easy. You need $100m+ of capital and a long time horizon to implement it. Very, very few people have that. It's less than 0.0004% of the population.

Re: How the 0.001% invest

#216

Post by ric2b »

ABCLAW wrote: post #164
mruts wrote: post #62

Earlier quoted context omitted.

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…

>One of the exceptions was [Person]'s family office, which managed a shit-ton of money and had some good people who actually knew something about portfolio construction. I'm not sure what type of professional you are, but you may be in breach of your responsibilities by disclosing the specifics listed above. I know this message might seem silly, but I'd hate if you got in trouble for complimenting the guy's affairs.…

The only specifics were [person]'s name. "shit-ton of money" and "good people" are not specifics.
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