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What's the SWR on $3.5 billion?
Old 05-03-2012, 11:02 PM   #1
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What's the SWR on $3.5 billion?

Seeing we all had fun with the recent lottery thread...it's time for another episode of ER Fantasy Island...

I like the wife's quote at the end.

Fuel Fix » Houston billionaire trader John Arnold retiring at 38
Quote:
One of the city’s richest men, has decided to retire — at 38.

In a letter to investors that was not made public but quickly found its way to the nation’s financial press, Arnold said he was quitting in order to “pursue other interests.” While the commonly used phrase often connotes a forced resignation, in this case the hedge fund was the one he controlled, and reportedly more than half of its assets were his own.

Arnold is No 3 on Houston’s list of billionaires, behind Rich Kinder and Jeffrey Hildebrand, with an estimated net worth of about $3.5 billion...

Arnold has kept a low profile while gaining, and then managing, great wealth. He rarely gives interviews to the press and seems uninterested in self-promotion. His rare public comments have concerned trading matters and charitable endeavors involving his foundation.

His decision to devote his talent to different endeavors may reflect a growing passion for philanthropic work as well as a desire for more time with his wife, Laura, and their three young children. Laura Arnold is a Yale-educated lawyer and former corporate executive who sits on the boards of a number of local organizations.

In leaving the hedge fund world to pursue other commitments, John Arnold may be simply following in his wife’s footsteps. She also had been professionally successful, then decided to take advantage of their success to do things she found more rewarding.

“I spent my life being ambitious,” she told the Chronicle of Philanthropy. “At some point, you realize that your highest and best use isn’t related to your personal work and your ambition. It’s related to the resources you’ve been given and your ability to make transformative change.”
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Old 05-03-2012, 11:13 PM   #2
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Seeing we all had fun with the recent lottery thread...it's time for another episode of ER Fantasy Island...

I like the wife's quote at the end.

Fuel Fix » Houston billionaire trader John Arnold retiring at 38
He should probably annuitize a billion or so. At his age, he needs some longevity insurance. I do wonder if he can get his 3.5 Bil (or whatever) out of the hedge fund without making the whole thing tank (his share included). It would be difficult for him if his assets were suddenly cut to 500 mil. How would he and the Mrs. survive? Walmart greeters
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Old 05-04-2012, 07:29 AM   #3
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I think he should point his philanthropic organization right at ER.org.
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Old 05-05-2012, 12:08 PM   #4
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Yes the liquidity is a key issue. Maybe he can sell his share to an aspiring young hedge fund manager. Of course that implies that his SWR is substantially higher than 4%!
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Old 05-05-2012, 01:28 PM   #5
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I figure his SWR is 10% of the remaining balance every year.

Suppose his fund returns exactly 0% in all future years - in real terms, the investment income matches inflation. A really horrible 60 year performance.

In that case, by the end of the 60th year, he will have withdrawn 99.8% of his original balance. This leaves him a $6.3 million (inflation adjusted) to fund his living expenses after age 98. That seems adequate.
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Old 05-05-2012, 05:06 PM   #6
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I see it this way.

In Houston, if I tried as hard as I possibly could, I think I might be able to spend $100K/year although that would be pushing it. He is probably a little spoiled so let's allow him TWICE as much, $200K/year. He has security needs due to his great wealth, so let's allot an additional $200K/year for 24 hour/day bodyguard protection, and an alarm system.

So, I figure his expenses might be a maximum of $400K. At 4%, that would require a nestegg of $10M. Let's allow an additional $10M to purchase ultra-secure living quarters and car, so the total nestegg he would need (for living quarters plus car plus SWR) would be $20M.

Any amount that he may have over and above that much will be wasted and unused. A thousand million is a billion, so that would be $3500 million, minus $20 million, to equal $3480 million.

How can we help this poor soul to not waste $3.48 billion? Let's see. One can give away $13K per person tax free. So, if my math is correct, he could give away $13K to each of about 267,692 people.
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Old 05-05-2012, 06:37 PM   #7
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If it were my money, I'd call the Gates Foundation. I expect they do lots of analysis on the best places to use money, and I'd probably have the same general approach.

Maybe I'd do a Buffett and just give them the money. I think I'd have more fun choosing which projects to fund.
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Old 05-06-2012, 12:22 AM   #8
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If it were my money, I'd call the Gates Foundation. I expect they do lots of analysis on the best places to use money, and I'd probably have the same general approach.

Maybe I'd do a Buffett and just give them the money. I think I'd have more fun choosing which projects to fund.
They've signed the Giving Pledge.

The Giving Pledge
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Old 05-06-2012, 08:37 PM   #9
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They've signed the Giving Pledge.
Very cool.

The closing of their profile letter:
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At the Foundation, we focus on areas where (1) philanthropic investments can lead to solutions that are self-sustaining in the long-term, (2) we can leverage a relatively small investment to create a large impact on total societal benefit and (3) the market does not presently yield optimal results, due to inefficiencies, lack of adequate information or other reasons. These guiding principles have led us to invest in a number of areas including education reform, health care, social services and social justice.


We are blessed to embark on this critical endeavor at a relatively early stage in our lives and with a great sense of urgency. We will devote the majority of our wealth, time and resources to philanthropy in the coming years, and we fully intend to achieve transformative results during our lifetime. There is no more worthwhile work and no greater mission. And there is no reason for delay in making a difference.
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Old 05-07-2012, 03:38 PM   #10
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He should probably annuitize a billion or so.
With that kind of capital... he wouldn't need to buy an annuity. He could just create his own...
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