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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&

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 office was worse. I guess when you that much money, more money means less than vanity and bragging rights.

deleted 8y ago
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mruts 8y ago
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 from like 150MM-500MM. They would have be much better off just investing in a hedge fund, but the family's ego didn't allow them. I think the point was to show off more than anything else. One of the exceptions was Sergey Brin's family office, which managed a shit-ton of money and had some good people who actually knew something about portfolio construction.
- whitepoplar 8y ago
  My guess is that most UHNWIs would do better to simply park their money in Vanguard index funds and call it a day.
  - pbrb 8y ago
    Was thinking the same thing, but I'm sure they still want to have a portion of their portfolio in high risk high reward investments. I also wonder if they can get better deals (Warren Buffet style) by taking large positions direct vs. buying indexes through a broker.
  - barrow-rider 8y ago
    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.
    - wil421 8y ago
      Well it got him into the White House. I guess for Trump the image of being an important business man is worth much more than money.
      - jjeaff 8y ago
        Which is why it's so interesting that the NY Times article ( that exposed his success as a product of a huge inheritance) didn't get much traction among any of his followers.
        wil421 8y ago
        The people promoting Trump do not care in the slightest. I doubt they’ll even care if any serious allegations come out of Muller’s probe.
        pesmhey 8y ago
        I remember listening to an interview with the bylines. Everyone in that interview sounded so sure it would dent Trump’s reputation. Man, I’m really not a fan of the guy, but his opponents have absolutely no idea what they’re up against, and haven’t for a long time. Trump is the harbinger of a return to patrimonialism. Family offices, a return to patrimonialism. You get a bunch of people who never really understood civics or finance and you try to govern them technocratically, and you’re going to struggle. But everyone in this demographic understands families. They see this dude being passed down wealth, and ‘making something’ of it, and setting his kids up. People understand that, especially the type of person who doesn’t necessarily understand how the neoliberal world works, in ways that are both in their favor and against it. Family offices are another data point in this trend towards capital accumulation, stark income inequality, and a retreat from public exposure.
  - Scoundreller 8y ago
    Risky if you’re non-American but could be liable for US estate taxes if you die before you move everything ex-US. You may have a local equivalent, but you may not.
    - charlesdm 8y ago
      UHNWIs don't invest in their own name, they generally use investment vehicles.
      - whitepoplar 8y ago
        What are some reasons for this?
        charlesdm 8y ago
        Often tax (depending on where they're resident) 1. Companies don't die, so are not liable to inheritance tax. 2. (Holding) companies often don't pay capital gains taxes, so money can compound tax free. You only pay tax at the end, when you take it out of the company. 3. If they're using (some) debt to invest, using a company shields them from liability and bankruptcy (Google Einar Aas, he bankrupted himself in personal name because he traded using a personal account with leverage)
- Gustomaximus 8y ago
  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 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. And I guess these manager have a bunch of the right people attached to them so it makes an easy stop.
  - ataturk 8y ago
    My take is that most of the action today is taking place in deals that the public can't access--look at how big universities are investing with private funds that just buy up the companies, take them private, or what have you. The public stock market is more just a cesspool of also rans these days. Look at GE <facepalm>. So yes, the "access to the deals" is key, and the rich are looking out for each other because they are politically aligned.
  - cik 8y ago
    I deal with multiple folks who have them. This is the real goal, though tongue-in-cheek. Ultimately they want monies to increase as the family logically increases in size.
  - savanaly 8y ago
    >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 person on the other side of the deal take a little more for themselves by selling there instead (at a slightly more favorable interest rate)? Is it because the rich investors are needed to bring some level of expertise or connections to the investment to make it work? If that's the case, and it seems likely, I would not say they are getting "access to better deals" per se. More like they are getting a normal rate of return and they have a valuable asset that they are renting out as well (their expertise or connections), and it all gets rolled into one number. But complaining about the rich having valuable assets is different from complaining about them having access to better investment opportunities.
- java-man 8y ago
  a pack of lawyers has been dispatched to your address...
- captain_chester 8y ago
  If you were smart you’d delete this comment and possibly your account. It’s not worth disclosing personal information about a client you worked on, anywhere online. Seems like an unnecessary risk, regardless of how trivial you think it was.
- ABCLAW 8y ago
  >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. Edit: I've editted out the person in question's name in case you do the same.
  - syn0byte 8y ago
    I'd love to see Brin's lawyers explain to the court how they found the real world contact info of a random user on HN.
    - rising-sky 8y ago
      Well, not so random, seems like it would be pretty easy when you give narrow personally identifiable snippets like "I worked at a portfolio analytics company so I had free reign to snoop around"... Who knows other similar comments they've said in other threads on HN?
    - woolvalley 8y ago
      Subpoena HN, get IP, Subpoena ISP, get customer info, Subpoena customer, etc.
  - ric2b 8y ago
    The only specifics were [person]'s name. "shit-ton of money" and "good people" are not specifics.
- icedchai 8y ago
  It's hard to beat the market. Why would the people managing funds at family offices do better?
EADGBE 8y ago
> We were measured directly against the fund of another frenemy family. So "keeping up with the Jones'" is something no one outgrows then... Interesting.
- isoskeles 8y ago
  This is a single anecdote.
smolder 8y ago
How do you cope with that? That people whose financial decisions involve 100s-of-poor-people-lifetimes levels of money are still so irrational in their motivation?
SilasX 8y ago
There was a line from the first season of the TV show Silicon Valley: "Are you kidding? [Rich VC] would spend a million dollars just to mildly annoy [competing VC]!"
throwizzle 8y ago
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.
- gnu8 8y ago
  I am profoundly unable to take seriously anyone who calls themself a “lord”. What time period are these people from?
  - advisedwang 8y ago
    Right up until 1999 this was a meaningful position with actual political power. Even now, non-hereditary lords comprise the upper chamber of parliament. Being a Lord in the UK is more or less equivalent to being a US senator.
  - infradig 8y ago
    My preferred personal pronoun is "lord". Pretty soon it will be required that people call me "lord" or I will get offended and take them to whatever human rights commision is appropriate.

deleted 8y ago

[deleted]

mruts 8y ago

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 from like 150MM-500MM. They would have be much better off just investing in a hedge fund, but the family's ego didn't allow them. I think the point was to show off more than anything else. One of the exceptions was Sergey Brin's family office, which managed a shit-ton of money and had some good people who actually knew something about portfolio construction.

whitepoplar 8y ago
My guess is that most UHNWIs would do better to simply park their money in Vanguard index funds and call it a day.
- pbrb 8y ago
  Was thinking the same thing, but I'm sure they still want to have a portion of their portfolio in high risk high reward investments. I also wonder if they can get better deals (Warren Buffet style) by taking large positions direct vs. buying indexes through a broker.
- barrow-rider 8y ago
  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.
  - wil421 8y ago
    Well it got him into the White House. I guess for Trump the image of being an important business man is worth much more than money.
    - jjeaff 8y ago
      Which is why it's so interesting that the NY Times article ( that exposed his success as a product of a huge inheritance) didn't get much traction among any of his followers.
      - wil421 8y ago
        The people promoting Trump do not care in the slightest. I doubt they’ll even care if any serious allegations come out of Muller’s probe.
      - pesmhey 8y ago
        I remember listening to an interview with the bylines. Everyone in that interview sounded so sure it would dent Trump’s reputation. Man, I’m really not a fan of the guy, but his opponents have absolutely no idea what they’re up against, and haven’t for a long time. Trump is the harbinger of a return to patrimonialism. Family offices, a return to patrimonialism. You get a bunch of people who never really understood civics or finance and you try to govern them technocratically, and you’re going to struggle. But everyone in this demographic understands families. They see this dude being passed down wealth, and ‘making something’ of it, and setting his kids up. People understand that, especially the type of person who doesn’t necessarily understand how the neoliberal world works, in ways that are both in their favor and against it. Family offices are another data point in this trend towards capital accumulation, stark income inequality, and a retreat from public exposure.
- Scoundreller 8y ago
  Risky if you’re non-American but could be liable for US estate taxes if you die before you move everything ex-US. You may have a local equivalent, but you may not.
  - charlesdm 8y ago
    UHNWIs don't invest in their own name, they generally use investment vehicles.
    - whitepoplar 8y ago
      What are some reasons for this?
      - charlesdm 8y ago
        Often tax (depending on where they're resident) 1. Companies don't die, so are not liable to inheritance tax. 2. (Holding) companies often don't pay capital gains taxes, so money can compound tax free. You only pay tax at the end, when you take it out of the company. 3. If they're using (some) debt to invest, using a company shields them from liability and bankruptcy (Google Einar Aas, he bankrupted himself in personal name because he traded using a personal account with leverage)
Gustomaximus 8y ago
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 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. And I guess these manager have a bunch of the right people attached to them so it makes an easy stop.
- ataturk 8y ago
  My take is that most of the action today is taking place in deals that the public can't access--look at how big universities are investing with private funds that just buy up the companies, take them private, or what have you. The public stock market is more just a cesspool of also rans these days. Look at GE <facepalm>. So yes, the "access to the deals" is key, and the rich are looking out for each other because they are politically aligned.
- cik 8y ago
  I deal with multiple folks who have them. This is the real goal, though tongue-in-cheek. Ultimately they want monies to increase as the family logically increases in size.
- savanaly 8y ago
  >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 person on the other side of the deal take a little more for themselves by selling there instead (at a slightly more favorable interest rate)? Is it because the rich investors are needed to bring some level of expertise or connections to the investment to make it work? If that's the case, and it seems likely, I would not say they are getting "access to better deals" per se. More like they are getting a normal rate of return and they have a valuable asset that they are renting out as well (their expertise or connections), and it all gets rolled into one number. But complaining about the rich having valuable assets is different from complaining about them having access to better investment opportunities.
java-man 8y ago
a pack of lawyers has been dispatched to your address...
captain_chester 8y ago
If you were smart you’d delete this comment and possibly your account. It’s not worth disclosing personal information about a client you worked on, anywhere online. Seems like an unnecessary risk, regardless of how trivial you think it was.
ABCLAW 8y ago
>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. Edit: I've editted out the person in question's name in case you do the same.
- syn0byte 8y ago
  I'd love to see Brin's lawyers explain to the court how they found the real world contact info of a random user on HN.
  - rising-sky 8y ago
    Well, not so random, seems like it would be pretty easy when you give narrow personally identifiable snippets like "I worked at a portfolio analytics company so I had free reign to snoop around"... Who knows other similar comments they've said in other threads on HN?
  - woolvalley 8y ago
    Subpoena HN, get IP, Subpoena ISP, get customer info, Subpoena customer, etc.
- ric2b 8y ago
  The only specifics were [person]'s name. "shit-ton of money" and "good people" are not specifics.
icedchai 8y ago
It's hard to beat the market. Why would the people managing funds at family offices do better?

EADGBE 8y ago

> We were measured directly against the fund of another frenemy family. So "keeping up with the Jones'" is something no one outgrows then... Interesting.

isoskeles 8y ago
This is a single anecdote.

smolder 8y ago

How do you cope with that? That people whose financial decisions involve 100s-of-poor-people-lifetimes levels of money are still so irrational in their motivation?

SilasX 8y ago

There was a line from the first season of the TV show Silicon Valley: "Are you kidding? [Rich VC] would spend a million dollars just to mildly annoy [competing VC]!"

throwizzle 8y ago

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.

gnu8 8y ago
I am profoundly unable to take seriously anyone who calls themself a “lord”. What time period are these people from?
- advisedwang 8y ago
  Right up until 1999 this was a meaningful position with actual political power. Even now, non-hereditary lords comprise the upper chamber of parliament. Being a Lord in the UK is more or less equivalent to being a US senator.
- infradig 8y ago
  My preferred personal pronoun is "lord". Pretty soon it will be required that people call me "lord" or I will get offended and take them to whatever human rights commision is appropriate.