Where and how do the super wealthy invest?

[HarryHawk]

Not sure if this is proper section to post this, moderators please feel free to move or delete. Thanks!

I've often wondered, how to the super wealthy invest? Do they heavily invest in the market? Real Estate? Buy their own corporation? If so, how? I could be wrong, but I somehow doubt they self-manage their assets. I wonder if they are active traders or buy and hold.

Of course, maybe there is no general answer, each uses a different method or strategy.

At least some of them must be successful with whatever they are doing. I wonder if they know something I don't.


Any thoughts?

 

[ncbill]

Own business (sometimes family) where they're successful.

Here is an old college frat brother of my dad's, though I've only met him a few times:

https://en.wikipedia.org/wiki/Joseph_W._Luter_III

Like the Hensons, his family business was sold to a 3rd party who botched it, so he was able to re-acquire it for a song.

And then build it back bigger and better until its recent sale to a Chinese firm.

 

[pjm-7]

The Denver Broncos are now up for sale. They expect the team go for $4 billion plus. Care to invest?

 

[Car-Guy]

I guess it depends on what is super wealthy... A measly 100m or a minimum of a couple of billion... In either case, I really wouldn't know. If it were me, and at my age, I don't know that I'd care to invest in anything. Just blow that dough and enjoy life at the top.

 

[Luvtoride]

Some went with Bernie Madoff. Fortunately, most of us would have never been offered the chance to invest with him.

 

[USGrant1962]

Most super wealthy are business owners and that is where the bulk of their assets reside. Just look at the "source" column in here https://www.forbes.com/forbes-400/

 

[street]

I would say they have people that just do the investing. The wealthy of the wealthy are the owners of those companies that the poor man invests in.

 

[ExFlyBoy5]

Lots of investments are available to those that most people aren't able to invest in because of rules/laws. I think most people would be surprised at how many wealthy folks are involved in limited partnerships. Many of the best ones you never hear about since you have to be a member of "the club."

 

[AlabaMalaysia]

My mother was a decently successful business person but has some pretty wealthy friends that I know only from afar but have made some observations. Most of them have a good bit of real estate holdings. I assume once you get super wealthy you want to diversify as much as you can with types of investments and geographic holdings. My wife's uncle is super rich on the board of a large bank and he has real estate across many countries. The company I work at is a small biotech startup and there are several very rich dudes funding it along with many other small tech companies so they like private equity stuff it seems.

 

[Stormy Kromer]

I only know of two billionaires in my region. The first has most of his assets in residential rental properties. That's how he made his billion in the first place.

The second has been buying farmland. Lots of farmland.

 

[euro]

Ross Perot famously was "all in bonds".

 

[viking111]

So if you have 150 million do you really need to invest it in some risky assets. They could just hold it in cash if they want. Or, 20/80 portfolio or whatever. If your assets are in your business you could slowly sell the stock and move it into whatever. If you sell the business you could do the same. I guess the answer is where ever and whatever way they want.

 

[marko]

I would say they have people that just do the investing. The wealthy of the wealthy are the owners of those companies that the poor man invests in.

This ^

I sat next to a guy on a flight who was in Lauderdale visiting clients. His outfit handles only "family money" that is in excess of $600MM. We had an interesting chat. He said that in general, his clients are extremely paranoid and distrustful of outsiders...their biggest fear is that they'll loose the money and, unlike grand-dad don't know how to make it back.

Friend of DW's is a honcho for a similar outfit. There's a ton of people who do this that you've never heard of unless you're in the know.

When I was working, we'd have a guy show up regularly at our trade shows (and sometimes at the office) and ask how things were going; general stuff, nothing insider.

He worked exclusively for one man living in Florida and invested for him; obviously he was a heavy shareholder but we could never figure out who that 'one man' was.

 

[chassis]

Sources of wealth data are widely available. The US Federal government has reports on this. Financial securities, real estate and business ownership are the big chunks.

Investors at higher levels of wealth have access to “alternative” investments like private equity, hedge funds and direct equity stakes in businesses.

Family offices are widely used as are smaller investment advisors. I know some people in these categories.

 

[Amethyst]

This self-made billionaire, at 78, sits in his office all day monitoring his money, while his wife goes out and luxuriates. No matter how much he gives away, he keeps making money. It sounds like he has a full-time money manager doing all the work, and checks in with him all day long. The billionaire also goes out and gives talks to students and others, seemingly about why it's not immoral that he has tons of money, while many others have little.

https://www.washingtonpost.com/nation/2022/01/30/moral-calculations-billionaire/

 

[athena53]

So if you have 150 million do you really need to invest it in some risky assets. They could just hold it in cash if they want. Or, 20/80 portfolio or whatever.

Speaking as someone NOT that fabulously wealthy, I think there's excitement in watching the pile grow for many people. Maybe you don't need it but it's more to give away, either to family or causes you care about.

CDs are boring.

 

[NW-Bound]

So if you have 150 million do you really need to invest it in some risky assets. They could just hold it in cash if they want. Or, 20/80 portfolio or whatever. If your assets are in your business you could slowly sell the stock and move it into whatever. If you sell the business you could do the same. I guess the answer is where ever and whatever way they want.

They had to do something right to get that $150M. Then, once they have it, why should they convert to [-]cash[/-] gold to hide under their bed? They just continue to do what they do.

That's what I would do. No need to take risk, but no need to go hide either.

 

[Bamaman]

Like has been said, most super wealthy are invested in family companies. I've seen them sell their companies, and go off into small companies--not all so successful.

But I can tell you where many now are putting their money as a sign of their wealth--personal jet airplanes. Everyone now seems to have one. My sister has LearJet 45 that has been known to haul teen grandchildren around to rock concerts. They've actually flown their Labradoodles to their mountain house.

But I know one family that has been successful since selling their main business, and they have 5 personal jets. The two 45ish year old sons have a pair of Bombardier Global Express planes that seat 16 passengers and can fly from NYC to Tokyo nonstop. It's just ridiculous.

 

[OldShooter]

Sources of wealth data are widely available. The US Federal government has reports on this. Financial securities, real estate and business ownership are the big chunks.

Investors at higher levels of wealth have access to “alternative” investments like private equity, hedge funds and direct equity stakes in businesses.

Family offices are widely used as are smaller investment advisors. I know some people in these categories.

I think you can look at public pension funds and large private foundations to get an idea. My impression:

Somewhat more than half seem to have indexed their stock market investments.

A good chunk of the portfolios are in "alternative" investments like direct ownership of real estate, timber land, and in businesses that are not sold to the public aka private equity.

At one point hedge funds were popular but as the statistics of their aggregate failure to perform have built up, they are diminishing. CALPERS, for one, will no longer invest in hedge funds.

Lots of investments are available to those that most people aren't able to invest in because of rules/laws. I think most people would be surprised at how many wealthy folks are involved in limited partnerships. Many of the best ones you never hear about since you have to be a member of "the club."

I think you're being overly paranoid here. "Rules/laws" relate mostly to investors being "qualified" and are attempts to protect the naïve and those who can't afford to lose money on risky deals. Limited partnerships are no big deal; I have been in several small local ones with investments of $20-50K. Lately the LLC format has been more popular but, regardless, they are not highly correlated with large wealth IMO.

I think the biggest factor in the unavailability of private deals to retail investors is the hassle factor. If I am a promoter, my goal is to fund my deal with a few large checks written by investors who will not turn into high-maintenance customers. The last thing I want to do is to sell to an army of tiny investors, some of whom are guaranteed to turn out to be clueless and crybababies. An important corollary here is that any deal being offered to the retail market is almost guaranteed to be stinky since if it was any good it would have been snapped up by the heavy hitters.

 

[euro]

An important corollary here is that any deal being offered to the retail market is almost guaranteed to be stinky since if it was any good it would have been snapped up by the heavy hitters.

Great point!

 

[NW-Bound]

This self-made billionaire, at 78, sits in his office all day monitoring his money, while his wife goes out and luxuriates. No matter how much he gives away, he keeps making money. It sounds like he has a full-time money manager doing all the work, and checks in with him all day long. The billionaire also goes out and gives talks to students and others, seemingly about why it's not immoral that he has tons of money, while many others have little.

https://www.washingtonpost.com/nation/2022/01/30/moral-calculations-billionaire/

Very interesting article. This man first made his money as an analyst/trader for Goldman Sachs, then later as the owner of his own hedge fund.

Cooperman is not a flamboyant billionaire.

What Cooperman had for transportation was a 25-year-old Schwinn bicycle he liked to ride around the neighborhood and a Hyundai he used for running errands a few times each week...

A resident drove by in a new Bentley, and Cooperman waved and then watched the $200,000 car drive on. “You get a lot of people who show off their wealth,” he said, “but I could buy and sell that guy 100 times.”

The article said that Cooperman has given a lot of money to charities and promised to continue to do so.

About his current investing activity, he has a staff mainly to manage his money. From Wikipedia:

He is the chairman and CEO of Omega Advisors, a New York-based investment advisory firm managing over $3.3 billion in assets under management, the majority consisting of his personal wealth.

Back in 2000, I read about Bill Gates' search for a money manager to run his investments. Gates' fortune back then was much less than what he has now, but it was still larger than many MFs. Hence, he needed a staff of analysts and traders to manage it.

With the fees that the billionaires would have to pay a hedge fund, they could hire people to run a personal hedge fund. One percent of a billion is $10 million/year, and these men have several billions. The tens of million pay a lot of salary and office rent.

 

[ncbill]

Still sounds like Cooperman is not able to enjoy the wealth he has accumulated:

"Their Florida home had a custom-built infinity pool, and in five years he’d never once gone in for a swim."

Were I anywhere near his financial position my "home office" would be a hammock somewhere on a Caribbean island.

 

[W2R]

Time in the market has worked to the advantage of long term, multi-generational wealth building in certain families.

As for how the latest generation in such families invest, perhaps for many the answer is however they want to invest. With that much money the family nest egg may be pretty bulletproof.

 

[SecondCor521]

What's your definition of "super wealthy", OP? I know people at $XM, $XXM, $XXXM, and $X,XXXM.

Probably over 99% of people in the world over time would consider $1M to be super wealthy.

 

[homestead]

This self-made billionaire, at 78, sits in his office all day monitoring his money, while his wife goes out and luxuriates. No matter how much he gives away, he keeps making money. It sounds like he has a full-time money manager doing all the work, and checks in with him all day long. The billionaire also goes out and gives talks to students and others, seemingly about why it's not immoral that he has tons of money, while many others have little.

https://www.washingtonpost.com/nation/2022/01/30/moral-calculations-billionaire/

from 7 a.m. until midnight he was typically seated at the desk in his office

No retirement for him.