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The majority of the world's richest people have their wealth tied up in companies they either founded or inherited.... if they are investing their capital they

The majority of the world's richest people have their wealth tied up in companies they either founded or inherited.... if they are investing their capital they have limitations most of us do not have to face. If I go from having to invest $1m to $100m to $100bn, my investment universe shrinks each time. For example, a small investor can invest in companies with market cap of ~$50m+....not possible for Warren Buffet. He can only invest in maybe less than a few hundred companies...with market caps in the region of a few $100bn.... there are of course treasuries/bonds but no seriously wealthy person has all of their money in bonds. In part because the returns are so low and income taxes are meaningfully higher than cap gains.

PakG1 8y ago
The way Bill Gates is doing it makes sense to me, and I imagine many of the super rich probably find a similar model. https://en.wikipedia.org/wiki/Cascade_Investment https://en.wikipedia.org/wiki/Cascade_Investment It financially does not make sense to have all eggs in one basket, the risk is inordinate. This has been mathematically proven over and over again. When you're smaller and aiming for big returns, go for it. When you're bigger, your universe is a bit different.
mruts 8y ago
On the other hand, if you don't have a lot of money, many investment strategies become infeasible. The move from 1mm to 100mm would definitely increase your investment universe, not decrease it. With 100mm you can do private equity, VC, debt, illiquid and obscure stuff, EM bonds, etc etc. Most of that you can't do with 1mm. But you are right that going from 100mm to 100bn definitely shrinks your universe.
- Blackstone4 8y ago
  Most PE funds have a minimum of $5m-$10m (less for VC)... so even $100m isn't enough to go directly to a PE firm....typically at this size, you might go through a fund of funds... Even at a small size, it's possible to invest in alternatives through public markets. I have my pension in listed private equity. You can also invest in private debt BDCs and closed-end funds that do infrastructure and a bunch of other things.

PakG1 8y ago

The way Bill Gates is doing it makes sense to me, and I imagine many of the super rich probably find a similar model. https://en.wikipedia.org/wiki/Cascade_Investment https://en.wikipedia.org/wiki/Cascade_Investment It financially does not make sense to have all eggs in one basket, the risk is inordinate. This has been mathematically proven over and over again. When you're smaller and aiming for big returns, go for it. When you're bigger, your universe is a bit different.

mruts 8y ago

On the other hand, if you don't have a lot of money, many investment strategies become infeasible. The move from 1mm to 100mm would definitely increase your investment universe, not decrease it. With 100mm you can do private equity, VC, debt, illiquid and obscure stuff, EM bonds, etc etc. Most of that you can't do with 1mm. But you are right that going from 100mm to 100bn definitely shrinks your universe.

Blackstone4 8y ago
Most PE funds have a minimum of $5m-$10m (less for VC)... so even $100m isn't enough to go directly to a PE firm....typically at this size, you might go through a fund of funds... Even at a small size, it's possible to invest in alternatives through public markets. I have my pension in listed private equity. You can also invest in private debt BDCs and closed-end funds that do infrastructure and a bunch of other things.