family office

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pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional

., among them financiers such as George Soros, Stanley Druckenmiller, Steve Cohen, Steve Schwarzman, and Leon Black.6 Many of them have their own family offices. Family office principals, who typically are hardworking and well grounded, above all treasure privacy. They institute high barriers to entry, often employing gatekeepers to filter and vet requests, because their riches make them perpetual targets for people who want something from them. As important job creators, taxpayers, and philanthropic supporters, family offices are powerful and influential forces in their communities. Whenever we invited public officials to a family office gathering, they would happily attend. A family office platform facilitates networking so that families can benefit from each other’s experiences, coinvest, and leverage buying power.

Throughout my career, I had only dealt with institutional investors, but after starting my own company, I stumbled into the private wealth space. Because I knew many ultra-high-net-worth individuals globally, the family office of an IT billionaire asked me to assist in building a global nonprofit platform for family offices, where they could meet to exchange views and cooperate without the involvement of financial intermediaries, such as bankers or other service providers like attorneys and tax advisers. Such gatherings are among the most exclusive and private, because these families and their representatives only open their ranks if you are one of them. Family offices are the investment management companies of wealthy families. Banks, financial firms, and multifamily offices typically manage the assets of families worth up to $500 million.

For families worth more than $500 million in liquid assets, having their own investment firms is expedient, because it affords them control, privacy, and cost efficiencies. The concept of a family office has evolved over a long time. Business tycoon John D. Rockefeller set up his family office in the nineteenth century. Often families have come into great wealth by building enormously successful companies, sometimes over the span of several generations. Among them are old industrial dynasties, nouveau industrialists, or tech billionaires. Some families consist of fewer than a dozen members, while others encompass hundreds. The priority of family offices is wealth preservation. According to a saying, a fortune lasts for three generations: The first one makes it, the second one lives on it, and the third one squanders it.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, diversification, diversified portfolio, family office, fixed income, glass ceiling, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, John Meriwether, Long Term Capital Management, margin call, market bubble, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shale / tar sands, oil shock, out of africa, paper trading, Paul Samuelson, Peter Thiel, price anchoring, purchasing power parity, reserve currency, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond, zero-sum game

Meanwhile, in today’s uncertain world, global imbalances are becoming more pronounced while political, geopolitical, and social instability seem to be evolving more rapidly than traditional investing institutions can manage. The following chapters present the thinking of some of the best minds in the investment world about how they interpret these events and try to profit from them, using what remains the most open and flexible mandate in the investment world: global macro. CHAPTER 4 The Family Office Manager Jim Leitner Falcon Management Wyckoff, New Jersey he sign reads both “Falcon Management” and “Aikido Spirit” outside the sprawling suburban New Jersey house that Jim Leitner calls base for his family office when he is not on the ground scouring for investments in India, the Ivory Coast, or some other far-flung location. Leitner manages mostly his own money and has been doing so for years. As a result, his approach to global macro markets is different from most other fund managers in that he is not long an implicit put option.

We think the future is a combination of the best from the real money world and the best from the hedge fund world to create a new paradigm. The big thing that distinguishes the real money world from the hedge fund world is redemptions. Universities don’t have redemptions, nor do family offices for that matter. Both are going to be around for years so they invest for the long term. Meanwhile, the hedge fund industry invests for the one- to three-month time horizon, which subjects managers to taking inefficiency risk and missing out on opportunities that are longer term in nature. 59 THE FAMILY OFFICE MANAGER 8,000 180 7,000 160 140 Ghana All Share Index Guinness Nigeria 6,000 120 5,000 100 4,000 80 3,000 60 2,000 40 1,000 20 0 4 05 nJa t-0 Oc 4 l-0 4 Ju Ap r-0 3 n04 Ja t-0 Oc 3 Ju l-0 r-0 3 Ap 3 n0 Ja t-0 2 Oc Ju l-0 2 r-0 2 Ap Ja n0 2 0 FIGURE 4.3 Ghana Stock Exchange All Share Index and Guinness Nigeria PLC, 2002–2005 Source: Bloomberg.

—George Soros After a certain high level of technical skill is achieved, science and art tend to coalesce in esthetics, plasticity, and form. The greatest scientists are always artists as well. —Albert Einstein CONTENTS Foreword by Joseph G. Nicholas (HFR Group) ix Preface xi 1. Introduction to Global Macro Hedge Funds by Joseph G. Nicholas (HFR Group) 1 2. The History of Global Macro Hedge Funds 5 3. The Future of Global Macro Hedge Funds 31 4. The Family Office Manager: Jim Leitner (Falcon Management) 35 5. The Prop Trader: Christian Siva-Jothy (SemperMacro) 71 6. The Researcher: Dr.Andres Drobny (Drobny Global Advisors) 103 7. The Treasurer: Dr. John Porter (Barclays Capital) 133 8. The Central Banker: Dr. Sushil Wadhwani (Wadhwani Asset Management) 161 9. The Dot-Commer: Peter Thiel (Clarium Capital) 181 10. The Floor Trader:Yra Harris (Praxis Trading) 199 11.


pages: 358 words: 104,664

Capital Without Borders by Brooke Harrington

banking crisis, Big bang: deregulation of the City of London, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, complexity theory, corporate governance, corporate social responsibility, diversified portfolio, estate planning, eurozone crisis, family office, financial innovation, ghettoisation, haute couture, high net worth, income inequality, information asymmetry, Joan Didion, job satisfaction, joint-stock company, Joseph Schumpeter, liberal capitalism, mega-rich, mobile money, offshore financial centre, race to the bottom, regulatory arbitrage, Robert Shiller, Robert Shiller, South Sea Bubble, the market place, Thorstein Veblen, transaction costs, upwardly mobile, wealth creators, web of trust, Westphalian system, Wolfgang Streeck, zero-sum game

Such concerns, combined with a surge in the number of ultra-high-net-worth individuals in recent years, has led to the increasing popularity of “family offices,” where a suite of professional wealth managers are employed full-time in the service of a single family or a small group of families.103 The Rockefellers are thought to have innovated the structure for their own use in the late nineteenth century.104 Family offices, which typically set fees as a percentage of assets under management—ranging from 0.25 percent to 1 percent—often cost $1 million or more annually, and are affordable only for those with $100 million or more in investable assets.105 Bruce, the Geneva-based wealth manager, called such offices “one-stop-shopping for the super-rich.” Elsewhere, family offices have been described as a “vanity cost,” and likened to owning a private jet in terms of offering privacy and control for an exorbitant price.

But just as demand for large private jets continues to grow, so does that for the ultra-high level of customization offered by this service model: assets under management in family offices are estimated to be $1.2 trillion and growing.106 This rising demand has spawned a cottage industry: for a fee of up to $80,000, a “matchmaker” firm will recruit top wealth managers for ultra-high-net-worth individuals seeking to staff a family office.107 In that rarefied labor market, wealth managers can command large incomes without exposing themselves to the risks of being a sole practitioner. However, some of those I interviewed opted to forgo this trade-off. Steve, the sole practitioner quoted above, decided that the risks were worth what he gained in job satisfaction: “I don’t want to go in-house [as part of a family office] because you get caught up in the day-to-day politics of the family and lose the … variety and challenge of dealing with different people in different situations.

APPENDIX Sample job postings for wealth managers Both of the following advertisements were placed on the STEP website by the recruitment firm AP Executive (www.ap-executive.com) in the summer of 2011. Location: Switzerland: Geneva Salary: US$250000–350000 per annum STEP Experience: TEP Qualified Key Skills/Keywords: Family office executive Coordination of the senior advisers, liaison between the family organisation and family members, management of a team, spread in different jurisdictions, will form part of the agenda. Our client, a UUHNWI, is looking for the head of his family office services. This executive senior level role requires a broad understanding of business and family issues and excellent leadership in providing administrative support to its family members. Coordination of the senior advisers, liaison between the family organisation and family members, management of a team, spread in different jurisdictions, will form part of the agenda.


Mastering Private Equity by Zeisberger, Claudia,Prahl, Michael,White, Bowen, Michael Prahl, Bowen White

asset allocation, backtesting, barriers to entry, Basel III, business process, buy low sell high, capital controls, carried interest, commoditize, corporate governance, corporate raider, correlation coefficient, creative destruction, discounted cash flows, disintermediation, disruptive innovation, distributed generation, diversification, diversified portfolio, family office, fixed income, high net worth, information asymmetry, intangible asset, Lean Startup, market clearing, passive investing, pattern recognition, performance metric, price mechanism, profit maximization, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, Silicon Valley, sovereign wealth fund, statistical arbitrage, time value of money, transaction costs

Examples of notable PE firms are buyout firms Kohlberg Kravis Roberts (KKR) and APAX Partners as well as venture firms Sequoia Capital and Kleiner Perkins Caufield Byers. LIMITED PARTNERS: Investors or LPs contribute by far the largest share of capital to any PE fund raised. LPs participate merely as passive investors, with an individual LP’s liability limited to the capital committed to the fund. Investors active in PE include private and public pension funds, endowments, insurance companies, banks, corporations, family offices, and fund of funds.5 LPs are purely financial investors and cannot be involved in the day-to-day operation or management of the fund or its investee companies without running the risk of forfeiting their limited liability rights. LPs legally commit to provide capital for investment when it is drawn down (or “called”) by the PE fund and they receive distributions of capital—including a share of profits—upon successful exit of the fund’s investments.

They offer the PE fund significantly more transaction flexibility and control over the exit process than an IPO—where the terms are often determined by security laws, exchange rules and underwriters—and are usually completed faster and at lower cost than an IPO. Third-party buyers may include strategic investors—domestic and international corporations—or financial investors—in particular PE funds but also hedge funds and family offices. The advantages and disadvantages of an exit involving a strategic buyer may differ significantly from one involving a PE buyer, as highlighted below. STRATEGIC BUYERS: Strategic investors’ operations and expertise in an industry will inform their approach in a sales process. The perceived synergies between their existing operations and the business to be acquired often entice “strategics” to propose a higher valuation than financial investors.

The process and degree of difficulty of raising a PE fund is markedly different between fund managers raising a first-time fund and those raising successor funds. Not all investors with an allocation to PE invest in first-time funds, narrowing the pool of available investors. It is therefore crucial for the first-time fund manager to target investors with the appropriate risk appetite and a history of supporting first-time managers. Common investors in first-time funds include endowments, family offices, specialist fund-of-funds and development finance institutions. For first-time PE teams raising capital, the common closed-end fund structure may not be the easiest model. Funding investments on a deal-by-deal basis allows a newly established PE firm to show its access to proprietary deal flow, deploy capital and establish relationships with the investor community without requiring LPs to commit to a closed-end fund and lock up their capital for the long term.


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, Commodity Super-Cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, invisible hand, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, market microstructure, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, purchasing power parity, quantitative easing, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, The Great Moderation, Thomas Bayes, time value of money, too big to fail, transaction costs, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

This is perhaps the greatest lesson of all from the crash: change your views as facts change. It is important to recognize and accept when things don’t work out as you expect. If you are proven wrong, adjust your outlook accordingly. To persistently hold on to views, regardless of changing reality, is a recipe for failure and constant distress. Chapter 3 The Family Office Manager Jim Leitner Falcon Management “ The Family Office Manager” is the most popular chapter in Inside the House of Money. The original interview was assembled from a series of discussions with Jim Leitner, who described his approach as attempting to combine the best of hedge fund investing with the best of real money management. In light of what happened to the real money world in 2008, those conversations provided the inspiration for this book.

Table of Contents Title Page Copyright Page Dedication Praise Foreword Preface Part One - REAL MONEY AND THE CRASH OF ‘08 Chapter 1 - Rethinking Real Money I. Why Real Money? II. The Evolution of Real Money III. RETHINKING REAL MONEY—MACRO PRINCIPLES Chapter 2 - The Researcher Chapter 3 - The Family Office Manager Part Two - The Invisible Hands Chapter 4 - The House Chapter 5 - The Philosopher Chapter 6 - The Bond Trader Chapter 7 - The Professor Chapter 8 - The Commodity Trader Chapter 9 - The Commodity Investor Chapter 10 - The Commodity Hedger Chapter 11 - The Equity Trader Chapter 12 - The Predator Chapter 13 - The Plasticine Macro Trader Part Three - FINAL WORD Chapter 14 - The Pensioner Conclusion Acknowledgements Bibliography About the Author Index Copyright © 2010 by Steven Drobny.

Markets around the world, from real estate to equities to commodities to credit, posted huge declines, taking down with them some of the world’s most venerable financial institutions, a wide variety of alternative asset managers (hedge funds, private equity, venture capital, and real asset managers), and a host of real money accounts (pension funds, insurance companies, endowments, foundations, family offices, and sovereign wealth funds). Almost everyone lost money in 2008, and in many cases more than anyone imagined possible. Anger and confusion linger in the aftermath of the crisis, but are by no means limited to market players. Main Street is reeling as homes and jobs have been lost, savings have evaporated, and many assumptions governing the stability of modern society have been challenged.


pages: 538 words: 147,612

All the Money in the World by Peter W. Bernstein

Albert Einstein, anti-communist, Berlin Wall, Bill Gates: Altair 8800, call centre, Charles Lindbergh, corporate governance, corporate raider, creative destruction, currency peg, David Brooks, Donald Trump, estate planning, family office, financial innovation, George Gilder, high net worth, invisible hand, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, job-hopping, John Markoff, Long Term Capital Management, Marc Andreessen, Martin Wolf, Maui Hawaii, means of production, mega-rich, Menlo Park, Mikhail Gorbachev, new economy, Norman Mailer, PageRank, Peter Singer: altruism, pez dispenser, popular electronics, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sand Hill Road, school vouchers, Search for Extraterrestrial Intelligence, shareholder value, Silicon Valley, Silicon Valley startup, stem cell, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, the new new thing, Thorstein Veblen, too big to fail, traveling salesman, urban planning, wealth creators, William Shockley: the traitorous eight, women in the workforce

But for all their rigidity, trusts remain the best bet for protecting against creditors, divorce, and bad investments, as well as for avoiding the estate tax. At the same time, more and more superwealthy families are also employing family offices to steer them in the right direction. Hamilton estimates there are about four thousand family offices in the United States today, an increase of about one thousand in less than ten years. The offices are customized, offering a range of services from investment decisions and tax advice to philanthropic research, prenuptial agreements, and help with heirs’ education. Some family members may not be wealthy enough to afford all of these services on their own, but as a combined force they have powerful advice at their fingertips. What the family offices excel at, says Todd Millay, is keeping the dividends rolling in. “The best way to make a small fortune is to start with a large one,” he says.

Hunt’s estimated $2 billion fortune was divided, albeit unequally, among fourteen children and forty-plus grandchildren. By 1995 there were 110 direct descendants of John D. Rockefeller, but only three, David Jr. and Laurance from the third generation and Winthrop Paul Rockefeller from the fourth generation, made it onto the Forbes 400. Sara Hamilton of Family Office Exchange, which advises some of America’s wealthiest families, including the Sulzbergers (publishing) and the Weyerhausers (lumber), tells of a Rockefeller family member who turned twenty-one and went along to the family office, only to discover that his inheritance was a mere $2 million. “He’s fifth or sixth generation, but everybody expects because his name is Rockefeller there’s a lot more there,” Hamilton says. “People expect these household names to have a tremendous amount of wealth when, in fact, they may not.

Others whose insights enrich the book included Rich Avanzino, president, Maddie’s Fund; Joe Breiteneicher, president, The Philanthropy Initiative; Kathy Bushkin, chief operating officer, United Nations Foundation; Chuck Collins, cofounder of Responsible Wealth; William Dietel, president, F. B. Heron and Pierson/Lovelace Foundation; Joan DiFuria and Stephen Goldbart, codirectors, Money, Meaning & Choices Institute; Sara Hamilton, of Family Office Exchange; Dr. Lee Hausner, of the family-wealth consulting firm IFF Advisors; John Healy, former president, Atlantic Philanthropies; Todd Millay, executive director, Wharton Global Family Alliance; Aryeh Neier, president of the Open Society Institute; Judith Stern Peck, director of the Money, Values and Family Life Project, Ackerman Institute for the Family; Tim Stone, president, and Ryan Nguyen, research manager, NewTithing Group; Celia Wexler, vice president for advocacy, Common Cause; and Rod Wood, Wilmington Trust.


pages: 192 words: 75,440

Getting a Job in Hedge Funds: An Inside Look at How Funds Hire by Adam Zoia, Aaron Finkel

backtesting, barriers to entry, collateralized debt obligation, commodity trading advisor, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, family office, fixed income, high net worth, interest rate derivative, interest rate swap, Long Term Capital Management, merger arbitrage, offshore financial centre, random walk, Renaissance Technologies, risk-adjusted returns, rolodex, short selling, side project, statistical arbitrage, stocks for the long run, systematic trading, unpaid internship, value at risk, yield curve, yield management

Make sure you can speak to everything on your resume, and don’t list deals that you can’t speak about for at least 30 minutes. You don’t want to look like an idiot. You should be able to spin any experience that you’ve had into something that would apply to the job you’re interviewing for. See Resume F in Appendix B on page 168. Case Study 13: A Family Office Becomes a Stepping-Stone This person didn’t focus on a career in hedge funds early on. After completing a banking program he had two different jobs—one at a firm doing acquisitions and another at a family office doing public investing. ■■■ I was an economics major at a small liberal arts college and had no visions of hedge funds. Even though I didn’t have a finance background I interviewed at some investment banks and consulting firms and ended up getting into an investment banking analyst program.

And, of course: Why did you leave your previous fund? There were no trick questions, brainteasers, psychological tests, or handwriting analyses. At this point they really want to know your investment ideas. CASE STUDIES To follow are case studies of five people who broke into hedge funds later in their careers. Of the five examples, one joined from private equity, the second moved over from a family office, another switched from sell-side equity research, a fourth broke in after working in an investment bank, and the last transitioned in after working at a long-only asset management firm. Case Study 12: From Private Equity into Hedge Funds This person spent a couple of years at a private equity shop before making the transition into a hedge fund. This is a good example of someone who got into a fund a little later in their career. ■■■ Before hedge funds my entire career had been in private equity.

I finally received a verbal offer at a dinner with the head of the firm, nearly four months after my initial meeting. I wasn’t a stereotypical investor who began reading the Wall Street Journal at a young age and buying stocks for my own account. In my case, I benefited from my investment banking experience, which gave me a solid foundation in corporate finance, and also from my private equity investing experience at the family office where I worked. My advice to others who aspire to work in a hedge fund would be to get the investment banking training under your “I would recommend that those belt. I don’t think the particular group matters, as most will give interested in hedge funds figure you a solid foundation in finance, capital structures, M&A, and out what they like and don’t like.” financings. I would recommend that those interested in hedge funds figure out what they like and don’t like.


pages: 340 words: 100,151

Secrets of Sand Hill Road: Venture Capital and How to Get It by Scott Kupor

activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, asset allocation, barriers to entry, Ben Horowitz, carried interest, cloud computing, corporate governance, cryptocurrency, discounted cash flows, diversification, diversified portfolio, estate planning, family office, fixed income, high net worth, index fund, information asymmetry, Lean Startup, low cost airline, Lyft, Marc Andreessen, Myron Scholes, Network effects, Paul Graham, pets.com, price stability, ride hailing / ride sharing, rolodex, Sand Hill Road, shareholder value, Silicon Valley, software as a service, sovereign wealth fund, Startup school, Travis Kalanick, uber lyft, VA Linux, Y Combinator, zero-sum game

., IBM pension, California State Teachers’ Retirement System)—Some corporations (although many fewer these days), most states, and many countries provide pensions for their retirees, funded mostly by contributions from their current employees. Inflation (particularly in health-care costs) and demographics (more retirees than current employees) eat away at the value of these pensions, absent the ability to generate real investment returns. Family offices (e.g., U.S. Trust, myCFO)—These are investment managers who are investing on behalf of very-high-net-worth families. Their goals are set by the individual families but often include multigenerational wealth preservation and/or funding large charitable efforts. There are single-family offices (as the name suggests, they are managing the assets of a single family and its heirs) and multifamily offices (essentially, sophisticated money managers who aggregate the assets of multiple families and invest them across various asset classes). Sovereign wealth funds (e.g., Temasek, Korea Investment Corporation, Saudi Arabia’s PIF)—These are organizations that manage the economic reserves of a country (often resulting from things that we US citizens know nothing about—government surpluses) to benefit current or future generations of their citizens.

What we share is a desire to create benign businesses, see them have an impact on and improve the world, and together realize some financial benefit along the way. The story of venture capital is really a subset of the story of entrepreneurship. As venture capitalists, we raise investment funds from a broad range of limited partners (LPs), such as endowments, foundations, pension plans, family offices, and fund of funds. The capital raised from LPs is then invested in great entrepreneurs with breakthrough ideas. Venture capitalists invest anywhere from the very early stage, where the startup is little more than an idea and a couple of people, to growth-stage startups, where there is some decent revenue coming in and the focus is on effectively scaling the business. Generally, a company leaves the venture ecosystem one of three ways: via an initial public offering (IPO), a merger or acquisition, or bankruptcy and a wind down.

Stanford University published a study in 2015 highlighting the concentration of venture-backed companies in the US public markets since 1974. Stanford picked this year because the VC industry dramatically expanded starting in 1979 with the passage of the “prudent man rule.” Prior to 1979, investing in VC was not considered “prudent” for most institutional investors. Thus, the industry largely attracted money from family offices, university endowments, and philanthropic foundations. With the introduction of this rule, pension funds were now permitted to invest in the VC asset class, and thus assets under management grew significantly. Despite the introduction of the rule in 1979, Stanford went back to 1974 to capture one or two significant companies—e.g., Apple—that would have otherwise been missed. Using the 1974 data cutoff, 42 percent of public companies are venture backed, representing 63 percent of total market capitalization.


pages: 202 words: 58,823

Willful: How We Choose What We Do by Richard Robb

activist fund / activist shareholder / activist investor, Alvin Roth, Asian financial crisis, asset-backed security, Bernie Madoff, capital asset pricing model, cognitive bias, collapse of Lehman Brothers, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, delayed gratification, diversification, diversified portfolio, effective altruism, endowment effect, Eratosthenes, experimental subject, family office, George Akerlof, index fund, information asymmetry, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, loss aversion, market bubble, market clearing, money market fund, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, principal–agent problem, profit maximization, profit motive, Richard Thaler, Silicon Valley, sovereign wealth fund, survivorship bias, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, ultimatum game

Immobility in the face of for-itself opportunity contributed to the run on the banks and elevated a weakness in the housing market into a crisis that tested nearly every financial institution in the world. Rich family offices controlled by strong-willed individuals skilled in finance could theoretically have helped fill the void left by immobilized institutional investors. In my experience, some did. But many did not: the richer the family head becomes, the less interested she is in digging into the technical details that a person on the spot needs to know and that earned the fortune in the first place. And the larger family offices grow, the more they adopt the controls typical of institutional investors. Applying Peirce’s rules, we can see why institutional investors hesitated to buy low-priced, complex, illiquid bonds.

See also mercy ambiguity effect, 24 American Work-Sports (Zarnowski), 191 Anaximander, 190 anchoring, 168 angel investors, 212–213n1 “animal spirits,” 169 Antipater of Tarsus, 134–135, 137 “anxious vigilance,” 73, 82 arbitrage, 70, 78 Aristotle, 200, 220n24 Asian financial crisis (1997–1998), 13 asset-backed securities, 93–95 asset classes, 75 astrology, 67 asymmetric information, 96, 210n2 authenticity, 32–37, 114 of challenges, 176–179 autism, 58, 59 auto safety, 139 Bank of New York Mellon, 61 Battle of Waterloo, 71, 205 Bear Stearns, 85 Becker, Gary, 33, 108–109 behavioral economics, 4, 10, 198–199 assumptions underlying, 24 insights of, 24–25 rational choice complemented by, 6 Belgium, 191 beliefs: attachment to, 51 defined, 50 evidence inconsistent with, 54, 57–58 formation of, 53, 92 persistence of, 26–28, 54 transmissibility of, 92–93, 95–96 Bentham, Jeremy, 127, 197–198 “black swans,” 62–64 blame aversion, 57, 72 brain hemispheres, 161 Brexit, 181–185 “bull markets,” 78 capital asset pricing model, 64 care altruism, 38, 104, 108–114, 115, 120, 135, 201 Casablanca (film), 120, 125 The Cask of Amontillado (Poe), 126–127 challenges, 202–203 authenticity of, 176–179 staying in the game linked to, 179–181 changes of mind, 147–164 charity, 40, 45–46, 119, 128 choice: abundance of, 172–174 intertemporal, 149–158, 166 purposeful vs. rational, 22–23 Christofferson, Johan, 83, 86, 87, 88 Cicero, 133–134 Clark, John Bates, 167 cognitive bias, 6, 23, 51, 147–148, 167, 198–199 confirmation bias, 200 experimental evidence of, 10–11, 24 for-itself behavior disguised as, 200–201 gain-loss asymmetry, 10–11 hostile attribution bias, 59 hyperbolic discounting as, 158 lawn-mowing paradox and, 33–34 obstinacy linked to, 57 omission bias, 200 rational choice disguised as, 10–11, 33–34, 199–200 salience and, 29, 147 survivor bias, 180 zero risk bias, 24 Colbert, Claudette, 7 Columbia University, 17 commitment devices, 149–151 commodities, 80, 86, 89 commuting, 26, 38–39 competitiveness, 11, 31, 41, 149, 189 complementary skills, 71–72 compound interest, 79 confirmation bias, 57, 200 conspicuous consumption, 31 consumption planning, 151–159 contrarian strategy, 78 cooperation, 104, 105 coordination, 216n15 corner solutions, 214n8 cost-benefit analysis: disregard of, in military campaigns, 117 of human life, 138–143 credit risk, 11 crime, 208 Dai-Ichi Kangyo Bank (DKB), 12–14, 15, 17, 87, 192–193 Darwin, Charles, 62–63 depression, psychological, 62 de Waal, Frans, 118 Diogenes of Seleucia, 134–135, 137 discounting of the future, 10, 162–164 hyperbolic, 158, 201 disjunction effect, 174–176 diversification, 64–65 divestment, 65–66 Dostoevsky, Fyodor, 18 drowning husband problem, 6–7, 110, 116, 123–125 effective altruism, 110–112, 126, 130, 135–136 efficient market hypothesis, 69–74, 81–82, 96 Empire State Building, 211–212n12 endowment effect, 4 endowments, of universities, 74 entrepreneurism, 27, 90, 91–92 Eratosthenes, 190 ethics, 6, 104, 106–108, 116, 125 European Union, 181–182 experiential knowledge, 59–61 expert opinion, 27–28, 53, 54, 56–57 extreme unexpected events, 61–64 fairness, 108, 179 family offices, 94 Fear and Trembling (Kierkegaard), 53–54 “felicific calculus,” 197–198 financial crisis of 2007–2009, 61, 76, 85, 93–94, 95 firemen’s muster, 191 flow, and well-being, 201–202 Foot, Philippa, 133–134, 135 for-itself behavior, 6–7, 19, 21, 27, 36, 116, 133–134, 204–205, 207–208 acting in character as, 51–53, 55–56, 94–95, 203 acting out of character as, 69, 72 analyzing, 20 authenticity and, 33–35 charity as, 39–40, 45–46 comparison and ranking lacking from, 19, 24, 181 consequences of, 55–64 constituents of, 26–31 defined, 23–24 difficulty of modeling, 204 expert opinion and, 57 extreme unexpected events and, 63–64 flow of time and, 30 free choice linked to, 169–172 in groups, 91–100 incommensurability of, 140–143 in individual investing, 77–78 in institutional investing, 76 intertemporal choice and, 168, 175, 176 job satisfaction as, 189 mercy as, 114 misclassification of, 42, 44, 200–201 out-of-character trading as, 68–69 purposeful choice commingled with, 40–43, 129, 171 rationalizations for, 194–195 in trolley problem, 137 unemployment and, 186 France, 191 Fuji Bank, 14 futures, 80–81 gain-loss asymmetry, 10–11 Galperti, Simone, 217n1 gambler’s fallacy, 199 gamifying, 177 Garber, Peter, 212n1 Germany, 191 global equity, 75 Good Samaritan (biblical figure), 103, 129–130, 206 governance, of institutional investors, 74 Great Britain, 191 Great Depression, 94 Greek antiquity, 190 guilt, 127 habituation, 201 happiness research (positive psychology), 25–26, 201–202 Hayek, Friedrich, 61, 70 hedge funds, 15–17, 65, 75, 78–79, 93, 95 herd mentality, 96 heroism, 6–7, 19–20 hindsight effect, 199 holding, of investments, 79–80 home country bias, 64–65 Homer, 149 Homo ludens, 167–168 hostile attribution bias, 59 housing market, 94 Huizinga, Johan, 167–168 human life, valuation of, 138–143 Hume, David, 62, 209n5 hyperbolic discounting, 158, 201 illiquid markets, 74, 94 index funds, 75 individual investing, 76–82 Industrial Bank of Japan, 14 information asymmetry, 96, 210n2 innovation, 190 institutional investing, 74–76, 82, 93–95, 205 intergenerational transfers, 217n1, 218n4 interlocking utility, 108 intertemporal choice, 149–159, 166 investing: personal beliefs and, 52–53 in start-ups, 27 Joseph (biblical figure), 97–99 Kahneman, Daniel, 168 Kantianism, 135–136 Keynes, John Maynard, 12, 58, 167, 169, 188–189 Kierkegaard, Søren, 30, 53, 65, 88 Knight, Frank, 145, 187 Kranton, Rachel E., 210–211n2 labor supply, 185–189 Lake Wobegon effect, 4 lawn-mowing paradox, 33–34, 206 Lehman Brothers, 61, 86, 89, 184 leisure, 14, 17, 41, 154, 187 Libet, Benjamin, 161 life, valuation of, 138–143 Life of Alexander (Plutarch), 180–181 Locher, Roger, 117, 124 long-term vs. short-term planning, 148–149 loss aversion, 70, 199 lottery: as rational choice, 199–200 Winner’s Curse, 34–36 love altruism, 104, 116, 123–125, 126, 203 lying, vs. omitting, 134 Macbeth (Shakespeare), 63 MacFarquhar, Larissa, 214n6 Madoff, Bernard, 170 malevolence, 125–127 Malthus, Thomas, 212n2 manners, in social interactions, 104, 106, 107, 116, 125 market equilibrium, 33 Markowitz, Harry, 65 Marshall, Alfred, 41, 167 Mass Flourishing (Phelps), 189–191 materialism, 5 merchant’s choice, 133–134, 137–138 mercy, 104, 114–116, 203 examples of, 116–120 inexplicable, 45–46, 120–122 uniqueness of, 119, 129 mergers and acquisitions, 192 “money pump,” 159 monks’ parable, 114, 124 Montaigne, Michel de, 114, 118 mortgage-backed securities, 93 Nagel, Thomas, 161 Napoleon I, emperor of the French, 71 neoclassical economics, 8, 10, 11, 22, 33 Nietzsche, Friedrich, 21, 43, 209n5 norms, 104, 106–108, 123 Norway, 66 Nozick, Robert, 162 observed care altruism, 108–112 Odyssey (Homer), 149–150 omission bias, 200 On the Fourfold Root of the Principle of Sufficient Reason (Schopenhauer), 209n5 “on the spot” knowledge, 61, 70, 80, 94, 205 Orico, 13 overconfidence, 57, 200 “overearning,” 44–45 The Palm Beach Story (film), 7 The Paradox of Choice (Schwartz), 172 parenting, 108, 141, 170–171 Pareto efficiency, 132–133, 136, 139–140 Peirce, Charles Sanders, 53–54, 67, 94 pension funds, 66, 74–75, 93, 95 permanent income hypothesis, 179 Pharaoh (biblical figure), 97–99 Phelps, Edmund, 17, 189–191 Philip II, king of Macedonia, 181 planning, 149–151 for consumption, 154–157 long-term vs. short-term, 148–149 rational choice applied to, 152–158, 162 play, 44–45, 167, 202 pleasure-pain principle, 18 Plutarch, 180–181 Poe, Edgar Allan, 126 pollution, 132–133 Popeye the Sailor Man, 19 portfolio theory, 64–65 positive psychology (happiness research), 25–26, 201–202 preferences, 18–19, 198 aggregating, 38–39, 132, 164 altruism and, 28, 38, 45, 104, 110, 111, 116 in behavioral economics, 24, 168 beliefs’ feedback into, 51, 55 defined, 23 intransitive, 158–159 in purposeful behavior, 25, 36 risk aversion and, 51 stability of, 33, 115, 147, 207, 208 “time-inconsistent,” 158, 159, 166, 203 present value, 7, 139 principal-agent problem, 72 Principles of Economics (Marshall), 41 prisoner’s dilemma, 105 private equity, 75 procrastination, 3, 4, 19, 177–178 prospect theory, 168 protectionism, 185–187 Prussia, 191 public equities, 75 punishment, 109 purposeful choice, 22–26, 27, 34, 36, 56, 133–134, 204–205 altruism compatible with, 104, 113–114, 115–116 commensurability and, 153–154 as default rule, 43–46 expert opinion and, 57 extreme unexpected events and, 62–63 flow of time and, 30 for-itself behavior commingled with, 40–43, 129, 171 mechanistic quality of, 68 in merchant’s choice, 135, 137–138 Pareto efficiency linked to, 132 rational choice distinguished from, 22–23 regret linked to, 128 social relations linked to, 28 stable preferences linked to, 33 in trolley problem, 135–136 vaccination and, 58–59 wage increases and, 187.


pages: 323 words: 92,135

Running Money by Andy Kessler

Andy Kessler, Apple II, bioinformatics, Bob Noyce, British Empire, business intelligence, buy and hold, buy low sell high, call centre, Corn Laws, Douglas Engelbart, family office, full employment, George Gilder, happiness index / gross national happiness, interest rate swap, invisible hand, James Hargreaves, James Watt: steam engine, joint-stock company, joint-stock limited liability company, knowledge worker, Leonard Kleinrock, Long Term Capital Management, mail merge, Marc Andreessen, margin call, market bubble, Maui Hawaii, Menlo Park, Metcalfe’s law, Mitch Kapor, Network effects, packet switching, pattern recognition, pets.com, railway mania, risk tolerance, Robert Metcalfe, Sand Hill Road, Silicon Valley, South China Sea, spinning jenny, Steve Jobs, Steve Wozniak, Toyota Production System, zero-sum game

I’ve been trying to get my family more involved in technology, but it’s a hard sell.” “Well, it’s a tough sector, but I think it is where all the growth comes from in the next decade. But it’s volatile.” “Most people in the room will tell you it’s way too risky.” “Can I ask you a question?” I asked. “Sure.” “Who are all these people?” “Some individuals but mostly family offices.” “What does that mean?” I asked. “Well, there are so many children and grandchildren and cousins in wealthy families that usually some of the ones interested in finance form a family office and manage the family’s wealth collectively. You know, allocate assets between fixed income and private equity, pick managers, that sort of stuff.” “But what kind of families?” I asked. Everybody looked pretty normal, not substantial. “Big ones.” “Like what?” “See those guys over there?” “Sure,” I answered, checking out three guys huddled at the next table, poring over documents.

See competitive pricing Defense Department, 101, 184 Dell, 111, 206 Dell, Michael, 121, 162 Dickens, Charles, 93 Diesel, Vin, 249 Digital Equipment, 103 digital music distribution, 205–7 digital revolution, 124–28 digital watches, 127–28 Diller, Barry, 247 Doerr, John, 193, 195, 196, 197 DOS (operating system), 278 dot.coms, 209–16, 223–27, 228–29 Douglas Aircraft, 184 Dow Chemical, 236 Dreadnought (warship), 95 Drexel Burnham, 11 Druckenmiller, Stanley, 293 DSL chips, 204, 205 DVD players, 204, 253–55, 257, 259 DVD read/write drives, 81–82, 84 DVDs, 259 eBay, 247 Ebbers, Bernie, 290 Edify, 106 Efficient Market theory, 176 Efland, Greg, 127 Eisner, Michael, 164–65 Elantec, 80–84, 85, 170, 202–8, 247, 248, 263 Index elasticity, 42, 68, 77, 103 computer costs, 58, 121, 126, 128, 183 e-mail, 70 birth of, 187 design transmission by, 252–53, 258–59 Engelbart, Doug, 125, 185, 190, 197, 199, 247, 259, 279 accomplishments of, 117–22 England. See Britain Enron, 290 Ethernet, 139, 190, 191 Exar, 208 exchange rates, 164, 165, 276 Extreme, 140 Fabless Semiconductor Association, 269–70 fabs (fabrication facilities), 91, 129–34, 199, 250, 251 factories. See manufacturing Faggin, Federico, 126 Fairchild Semiconductor, 101–3, 124 family offices, 109–10 Fidelity Investments (Fido), 11, 27, 30, 31 file sharing, 190 Fleet Bank conference (1999), 175–79, 188 Fleet Boston Robertson Stephens conference (2000), 217–20, 225 flying shuttle, 64 Forbes, 40, 195 Forbes ASAP, 195 Foundry, 140 Francis, Stu, 44 Full Service Network, 194 Fulton, Robert, 92 Index Gates, Bill, 121, 125, 126, 127, 258 GDP, 237, 274 GDS-II files, 252, 254 General Electric, 274 General Magic, 97–98, 142 General Motors, 172, 241, 243, 267, 269, 277 genomic sorting, 296 GeoCities, 213 George III, King, 51, 56 Ghana, 280, 281–83, 294, 295 gigabit companies, 139–40 Gilder, George, 183 Global Crossing, 183, 187, 290 GM.

See venture capitalists venture capitalists, 130, 138, 139, 144–45, 194, 197–98, 201 VentureStar, 3 Verity, 97 Versant, 60–63, 96 Vietnam, 281 Visigenic, 106 Vonderschmitt, Bernie, 129–31 voodoo economics, 276 Wall Street Journal, 216, 259 Wal-Mart, 78, 255 WANS, 188, 199 Warner Brothers, 71 warships, 95 watches, digital, 127–28 waterfalls (big-time trends), 73, 77–79, 225, 279, 295 Water Frame, 65 Watt, James, 53–55, 57, 65, 66, 78, 89, 91, 95, 125–26, 190, 268 wealth, 278, 280 creation of, 248, 257, 275–76, 296 family offices and, 109–10 intellectual property and, 263 meaning of, 233–35 weaving, 64–65, 66 Web. See Internet Western Digital, 128 Whitaker Investments, 176 Whitney, Eli, 67 wide area networks, 188, 199 Wilkinson, John, 51–52, 56–57, 78, 101, 268 William Morris Agency, 196 Windows, 197, 247, 259, 274, 276, 277 Winnick, Gary, 183, 187, 290 Winstar, 179 Wintel, 265, 277 wireless technology, 179, 296 worker training, 122 World Bank, 264 WorldCom, 225, 290 Worldtalk, 106 Wozniak, Steve, 128 Wynn, Steve, 50 Xanadu, 118 Xerox PARC (Palo Alto Research Center), 118, 189, 190–91 Xilinx, 130, 131 Yahoo, 92, 93, 136, 143, 223, 247 Yamaichi, 160 Yamamoto, Takatoshi, 154–61 yen-carry trade, 162–65, 168, 292 Z80 home computer, 127 Zilog, 127 Zona, Hank, 131 Zoran, 96 About the Author Andy Kessler is the author of the book that rippled through the financial world, Wall Street Meat: My Narrow Escape from the Stock Market Grinder.


Saudi America: The Truth About Fracking and How It's Changing the World by Bethany McLean

addicted to oil, American energy revolution, Asian financial crisis, buy and hold, corporate governance, delayed gratification, Donald Trump, family office, hydraulic fracturing, Jeff Bezos, Mark Zuckerberg, Masdar, oil shale / tar sands, peak oil, Silicon Valley, sovereign wealth fund, Upton Sinclair, Yom Kippur War

One energy analyst calculated that to maintain production of 1 million barrels per day, shale requires up to 2,500 wells, while production in Iraq can do it with fewer than 100. For a fracking operation to show growth requires huge investment each year to offset the decline from the previous years’ wells. To Einhorn, this was clearly a vicious circle. Another skeptical investor named Jonathan Tepper, who founded a firm called Variant Perception that provides research to hedge funds and family offices, put together a presentation in which likened the dynamics of fracking to the Red Queen’s race in Alice in Wonderland: “The Red Queen has to run faster and faster in order to keep still where she is.” Because the Red Queen’s race requires so much money, it wouldn’t have been possible without the ultra-low interest rate policy that the Federal Reserve has had for the last decade. Amir Azar, a fellow at Columbia’s Center on Global Energy Policy, wrote that by 2014, the industry’s net debt exceeded $175 billion, a 250 percent increase from its 2005 level.

That’s in large part because it takes far less effort and expense to get natural gas to flow through fracked rock than it does to get oil to do so, and the decline rates are far less severe. In a 2012 research report, Credit Suisse noted that the average recovery of a gas well is three to five times that of a typical oil well. Einhorn’s views were mostly echoed by the work done by a little-known employee-owned firm called SailingStone Capital Partners. Based in San Francisco, SailingStone specializes in natural resources investments for its clients—mainly endowments and family offices—and does exhaustive research, including hiring engineers to evaluate various plays and digging deeply into the numbers. SailingStone had already quietly been raising concerns about the way executives were paid in the shale business. Instead of being paid based on the financial results they produced, they were paid for growing production, regardless of the profits. After Einhorn’s presentation, SailingStone wrote its own letter to investors.


pages: 244 words: 79,044

Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer

activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, NetJets, new economy, Ponzi scheme, post-work, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond

Although none were my closest friends, they were all people I knew quite well. I expected some of the natural scepticism that rich people often display towards ‘friends’ who ask for favours, but soon found that they had much more sophisticated ways of saying no. Nobody actually took offence or suggested that I was only friends with their money. On the contrary, they would try to help me by introducing me to either the main investment person at their family office (if they were very wealthy, with above say $100 million in assets) or, for the slightly less well-off, their private banker. Max Liechtenstein introduced me to LGT; one of the Rockefeller heirs introduced me to their fund, etc. As I followed up with these professional advisers, a common theme emerged. The advisers would often go out of their way to show that they already knew about Holte. It was just that they had decided that the investment did not fit their investment criteria for reasons that had nothing to do with Holte, but rather to do with the brilliant investment strategy they had planned for the family.

As if it hadn’t already done so. That evening on my way home from work I stopped to buy flowers for Puk to reinforce my commitment to our wedding. I was standing by the cash register with my ‘reduced to clear’ bouquet when Borut, a friend from college, saw me. ‘No wonder you get all the girls,’ he laughed. The race to find investors for $1–2 million meant hitting up the smaller funds of funds and family offices we had met while fund-raising and paying them special attention that many of them were not used to. When an investor with a potential investment of $1–2 million approaches a multi-billion-dollar hedge fund they might get a meeting with marketing person number six, but the George Soros equivalent is unlikely to find time in his schedule. At Holte Capital they would get all the love and attention they could desire.

A Chicago-based fund of funds decided to invest $2 million and committed to investing another $1 million the following month if there were also other investors investing more. They liked what we did and that our initial returns had no market correlation. The $2 million meant we could keep going at least another couple of months. The following month we built on the momentum. A UK fund invested $2.5 million, a Kuwaiti family office invested $1 million, and a New York-based fund of funds invested $750,000. With these new investments, our new friends from Chicago kept their commitment and invested a further $1 million. Excellent. From being a $3.5 million hedge fund on 31 January 2003 we went to work on the morning of 1 March running a hedge fund of around $11 million. Not quite a big-time hedge fund, but fast getting towards the break-even point where we could cover our expenses.


pages: 385 words: 118,901

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street by Sheelah Kolhatkar

Bernie Madoff, Donald Trump, family office, fear of failure, financial deregulation, hiring and firing, income inequality, light touch regulation, locking in a profit, margin call, medical residency, mortgage debt, p-value, pets.com, Ponzi scheme, rent control, Ronald Reagan, short selling, Silicon Valley, Skype, The Predators' Ball

Attorney for the Southern District of New York declared SAC a “magnet for market cheaters” and said that the company had “trafficked in inside information on a scale without any known precedent” in the history of hedge funds. “They’re a great counterparty.” During discussions with Cohen’s lawyers prior to the indictment of SAC, the U.S. Attorney’s Office had made it clear that, in order to resolve the case, Cohen would have to shut his hedge fund down. Cohen would still have close to $10 billion of his own money, however, which he would be allowed to trade and invest as a private family office. The government could not stop him from trading his own money. Until he was convicted, Cohen and his army of traders would still command respect from Wall Street’s major investment banks and have access to the best IPO allocations. The $10 billion number was important to Cohen. It sent a signal to the world that nothing had really changed. Then, in the second week of September, Cohen’s lawyers got a call from Anjan Sahni, the co-chief of the securities unit at the U.S.

“Steve is a very serious, very astute collector,” gushed William Acquavella, one of Cohen’s art dealers, in The New York Times. “He also has just the right instincts, ones that can’t be learned from reading art history books.” Cohen had been working to cleanse his reputation on Wall Street as well, trying to create distance between himself and the legal scandal. As required by the criminal settlement with his company, Cohen had closed SAC and turned it into a private family office that invested only his own money, close to $10 billion. It was important to him, that $10 billion figure. In April 2014, three months after Martoma was convicted, Cohen changed his firm’s name from SAC Capital Advisors to Point72 Asset Management, a reference to its address at 72 Cummings Point Road in Stamford. He also removed his top associates and advisors who had helped guide him through his legal troubles.

The SEC’s case against Cohen for failing to supervise Martoma and Steinberg was still unresolved. The agency wanted to bar him from the securities industry for life, but Cohen was fighting it. He hired the celebrity defense lawyer David Boies to join the legal team working on the SEC case. He told friends that he expected to run another hedge fund in the not-too-distant future, something that would likely be impossible if the SEC won its case. In the meantime, Cohen’s “family office” was earning him hundreds of millions of dollars a year. He was still trading billions, he was still buying art—eight years and every resource the government could direct at him couldn’t stop him. — Over the course of the three years in which I conducted the reporting for this book, I was in and out of contact with Cohen’s office, attempting to arrange an interview with him. I called and wrote letters and had meetings with his representatives.


pages: 372 words: 109,536

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money by Frederik Obermaier

banking crisis, blood diamonds, credit crunch, crony capitalism, Deng Xiaoping, Edward Snowden, family office, high net worth, income inequality, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, mega-rich, Mikhail Gorbachev, mortgage debt, Nelson Mandela, offshore financial centre, optical character recognition, out of africa, race to the bottom, We are the 99%, WikiLeaks

By all appearances, this yacht is also held by a shell company in another tax haven. All perfectly organized by a professional family office. But is it normal to set up one offshore company here, one there, and another over there? In the world of the mega-rich, the answer is evidently: yes. [ ] At some point towards the end of the last century, a parallel universe emerged in which the ‘uber-wealthy’, a term used in America to describe the richest of the rich, park their assets somewhere offshore, simply as a matter of course. The number of very rich and very famous families in our data who have parked part of their assets in shell companies is in three figures. The asset managers of all the family offices, exclusive private banks and large VIP departments of the major banks assist with this. If you ask anyone employed in this secretive industry why the money almost automatically ends up offshore, you will be told that it certainly doesn’t have anything to do with tax avoidance or tax evasion.

In fact, according to the charity Oxfam, the top 1 per cent of the global population has more wealth than the rest of the world put together. It’s hardly surprising that a booming industry has formed around this 1 per cent, existing solely by adding to this tremendous wealth. Part of this industry is represented in our data, involving almost every country and thousands of companies. It’s the family offices, asset management companies, banks, investment advisers, tax experts, and of course Mossack Fonseca itself. All for the 1 per cent. [ ] One per cent. From that figure, an established political term has evolved to denote the richest 1 per cent of a country. In the US, the term was turned on its head to provide the slogan of a political movement: ‘We are the 99%’. This was chanted by supporters of the Occupy Wall Street movement; ‘99%’ was scrawled across placards and banners.


pages: 1,106 words: 335,322

Titan: The Life of John D. Rockefeller, Sr. by Ron Chernow

business cycle, California gold rush, collective bargaining, death of newspapers, delayed gratification, double entry bookkeeping, endowment effect, family office, financial independence, Frederick Winslow Taylor, George Santayana, God and Mammon, income inequality, invisible hand, Joseph Schumpeter, Louis Pasteur, Mahatma Gandhi, Menlo Park, New Journalism, oil rush, oil shale / tar sands, passive investing, plutocrats, Plutocrats, price discrimination, profit motive, Ralph Waldo Emerson, refrigerator car, The Chicago School, Thorstein Veblen, transcontinental railway, traveling salesman, union organizing, Upton Sinclair, white picket fence, yellow journalism

He was installed at an oak rolltop desk on the austere and slightly shabby ninth floor, in an office suite dedicated to his father’s outside investments and philanthropies. He worked cheek by jowl with Frederick T. Gates, George Rogers, and a telegrapher, Mrs. Tuttle, who had the dubious honor of opening Rockefeller’s crank mail—and “there was a great deal of it,” said Junior.25 Though he worked in the Standard Oil building, Junior was uninvolved in its management, and he belonged instead to the incipient Rockefeller family office. If his $6,000 annual salary, paid by father, seemed generous, it was a disguised allowance that kept Junior in a state of childlike dependence. Junior turned aside suggestions that he go to law school or treat himself to an around-the-world trip. “I felt that I had no time for either, that if I was going to learn to help Father in the care of his affairs, the sooner my apprenticeship under his guidance began, the better.” 26 Junior was again living at 4 West Fifty-fourth Street and had ample opportunity to sound him out, yet the taciturn Senior provided no clues about what he expected of his son, leaving him in limbo.

During the summer of 1909, the fifty-six-year-old Gates was suffering from nervous strain, likely from overwork, and wanted to spend more time with his wife and seven children. Around 1912, the once threadbare Minnesota preacher picked up at bargain prices twenty thousand acres of land near Hoffman, North Carolina, and set about growing cotton, corn, and oats and raising livestock on a thousand-acre farm with a peach orchard of seventeen thousand trees. In August 1912, Gates tendered his resignation from the business side of the family office to devote himself solely to the philanthropies. Long reliant upon Gates’s sound judgment, Rockefeller tried to sweet-talk him into staying: “Shall we not, dear friend, continue along life’s pathway together, both of us recognizing the propriety for ourselves of increasing freedom from care, but, nevertheless, both continuing to give what time we wisely and appropriately can, to the large and important questions, old as well as new, which we find ourselves in a position to help to solve?”

Never feel as if people—both boys and girls—wanted to be with me.”22 “Can’t keep smile on my face which is most embarrassing. Muscles tremble. Give anything to be over it.” 23 In his final bleak college entry, John recorded, “Guess the reason I am glad to get through college is because I have made rather a mess of it; also haven’t really made hardly any friends.”24 After graduating, John traveled around the world before taking up his duties at 26 Broadway, where he placed himself at his father’s disposal. The family office was now an enormous bureaucracy staffed by more than one hundred people, including lawyers, accountants, money managers, and real-estate experts. If Rockefeller had let Junior wander confusedly during his early years at 26 Broadway, Junior handled his son in a much more direct and stifling manner. During John’s first day at work on December 2, 1929, Junior held a press conference to introduce his son then proceeded to dominate the discussion.


pages: 224 words: 13,238

Electronic and Algorithmic Trading Technology: The Complete Guide by Kendall Kim

algorithmic trading, automated trading system, backtesting, commoditize, computerized trading, corporate governance, Credit Default Swap, diversification, en.wikipedia.org, family office, financial innovation, fixed income, index arbitrage, index fund, interest rate swap, linked data, market fragmentation, money market fund, natural language processing, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, short selling, statistical arbitrage, Steven Levy, transaction costs, yield curve

STN currently has Passport, and SunGard’s BRASS and Broker Direct U2. 15.3 Order Management Systems The source for information provided in this section is Capital Institutional Services, Inc. Fourth Quarter 2005. Advent Moxy Moxy (see www.advent.com) is licensed by bank trust departments, money managers, broker-dealers, wrap sponsors, financial planners, hedge funds, mutual funds, corporations, family offices, and insurance companies. 176 Electronic and Algorithmic Trading Technology The range of assets under management is from $100 million to over $40 billion, with the typical client having between $3 to $5 billion in assets under management. Moxy is currently licensed at over 630 firms and has a presence in the United States, Europe, Canada, Mexico, Australia, and the Far East. Moxy runs on Microsoft SQL Server 2000.

Advent Software, Inc. is a provider of Enterprise Investment Management solutions, offering stand-alone and client/server software products, data interfaces, and related services that automate and integrate missioncritical functions of investment management organizations. Advent has licensed its products to more than 6,000 financial institutions in 36 countries for use by more than 60,000 concurrent users. The company’s common stock is traded on the NASDAQ National Market under the symbol ADVS. Antares Antares (see www.ssctech.com) is marketed and sold to buy-side money managers including hedge funds, family offices, institutional asset managers, proprietary trading desks, short-term (money market) desks, pension funds, and mutual funds. The range of assets under management for an Antares client is from $100 million for some of the smaller hedge funds, and up to $75 billion for the larger asset managers. The typical Antares client has $1 to $10 billion in assets under management. Antares has an open database client/ server (Sybase or Microsoft SQL Server) architecture, which runs on the Windows Server operating system and/or Solaris UNIX.


pages: 363 words: 28,546

Portfolio Design: A Modern Approach to Asset Allocation by R. Marston

asset allocation, Bretton Woods, business cycle, capital asset pricing model, capital controls, carried interest, commodity trading advisor, correlation coefficient, diversification, diversified portfolio, equity premium, Eugene Fama: efficient market hypothesis, family office, financial innovation, fixed income, German hyperinflation, high net worth, hiring and firing, housing crisis, income per capita, index fund, inventory management, Long Term Capital Management, mortgage debt, passive investing, purchasing power parity, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, Silicon Valley, stocks for the long run, superstar cities, survivorship bias, transaction costs, Vanguard fund

In this program, which Charlotte Beyer of the Institute for Private Investors and I founded in 1999, the investors themselves come to Wharton for a week to learn about how to invest their wealth. As of 2010, almost 600 ultra-high net worth investors have taken part in this program. This program has given me perspective from the investor’s side of the advisor-investor relationship. I have also had extensive experience as an advisor to the family offices of ultra-high net worth investors and as a consultant to pension funds and endowments. What I have learned is that investing isn’t easy. But as shown in this book, thoughtful asset allocation provides discipline to the investment process and gives the best chance of building and safeguarding wealth. The purpose of this book then is to help guide the investment advisor through all of the major decisions in designing a portfolio.

Marston has taught asset allocation in the CIMA investment management certificate program at Wharton since the program was founded in 1988. He has also given investment presentations throughout this country as well as in more than a dozen countries in Europe, Latin America, and Asia. Since 1999, he has directed the Private Wealth Management Program at Wharton, a program for ultra-high net worth investors. He also serves as an advisor to several family offices and investment companies. xvii P1: TIX/b FM P2: c/d QC: e/f JWBT412-Marston T1: g January 6, 2011 10:37 xviii Printer: Courier Westford P1: TIX/b FM P2: c/d QC: e/f JWBT412-Marston T1: g January 6, 2011 10:37 Printer: Courier Westford About the Book his is a book designed to be read by investment advisors. The book is rich in information about individual asset classes, including both traditional assets like stocks and bonds as well as alternative investments such as hedge funds, private equity, real estate, and commodities.

Markowitz (1952) introduced the efficient frontier, the combination of portfolio returns and risks that maximize return for a given risk. The efficient frontier is discussed in Chapter 8. 2. Ibbotson SBBI returns are reported in SBBI Yearbooks (©2010 Morningstar). See Note 5. 3. David Swensen has written two books of interest to investors. Swenson (2005) is written for ordinary investors while Swensen (2009, 2nd edition) describes investment strategies for institutional investors (or family offices). 4. Technically, there have been ten recessions since 1951 because the recession in the early 1980s was actually a double dip downturn with a recession from January 1980 to July 1980 followed by a second recession from July 1981 to November 1982. In Table 1.1, only the second deeper recession is examined. R R SBBI 2010 Classic Yearbook, ©2010 Morningstar. All rights 5. Ibbotson reserved. Used with permission.


pages: 269 words: 70,543

Tech Titans of China: How China's Tech Sector Is Challenging the World by Innovating Faster, Working Harder, and Going Global by Rebecca Fannin

Airbnb, augmented reality, autonomous vehicles, blockchain, call centre, cashless society, Chuck Templeton: OpenTable:, cloud computing, computer vision, connected car, corporate governance, cryptocurrency, data is the new oil, Deng Xiaoping, digital map, disruptive innovation, Donald Trump, El Camino Real, Elon Musk, family office, fear of failure, glass ceiling, global supply chain, income inequality, industrial robot, Internet of things, invention of movable type, Jeff Bezos, Kickstarter, knowledge worker, Lyft, Mark Zuckerberg, megacity, Menlo Park, money market fund, Network effects, new economy, peer-to-peer lending, personalized medicine, Peter Thiel, QR code, RFID, ride hailing / ride sharing, Sand Hill Road, self-driving car, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart transportation, Snapchat, social graph, software as a service, South China Sea, sovereign wealth fund, speech recognition, stealth mode startup, Steve Jobs, supply-chain management, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, urban planning, winner-take-all economy, Y Combinator, young professional

Dozens of Chinese new-energy vehicle makers have established Silicon Valley centers to upgrade R&D for next-generation all-electric, self-driving vehicles. •Social commerce: Nifty Pinduoduo lets shoppers buy directly on their mobile from merchandisers, get coupons, win prize drawings, and earn discounts when they put together a group purchase with their connections. Over the past decade, China’s great tech leap forward has been supercharged by an abundance of venture capital often sourced from Western pension funds, endowments, family offices, and foundations. Records keep getting set for funding sizes, IPOs, deals, and investment performance (see chapter five, page 127). China’s ride-hailing leader, Didi Chuxing, has pulled in $21 billion in funding since starting in 2012, and even took over rival Uber in China in 2016 in a groundbreaking $35 billion transaction.34 Several Chinese tech unicorns have scored blockbuster IPOs: Chinese smartphone maker Xiaomi nabbed a market capitalization of $54 billion and food services app Meituan attracted $53 billion, while shopping app Pinduoduo took only three years to go from zero to a $24 billion IPO in New York.

“We believe the era of large-scale profitability of Chinese startups has just begun.” Wei Zhou Founder and managing partner, China Creation Ventures More capital is flowing to proven Chinese venture firms from large US pensions such as CalPERS (California Public Employees’ Retirement System) and CalSTRS (California State Teachers Retirement System); sovereign wealth funds, including Singapore’s Temasek and GIC; rich serial entrepreneurs; family offices; fund of funds; and university endowments, including Yale, Princeton, Northwestern, and Duke. Money also has flowed from Chinese government–backed investor groups into Chinese currency RMB funds that can invest directly in Chinese startups and take them public in China, such as the Nasdaq-style ChiNext in Shenzhen and16,17 the new Shanghai Science & Technology Innovation Board for China’s emerging companies to list.


pages: 77 words: 18,414

How to Kick Ass on Wall Street by Andy Kessler

Andy Kessler, Bernie Madoff, buttonwood tree, call centre, collateralized debt obligation, family office, fixed income, hiring and firing, invention of the wheel, invisible hand, London Whale, margin call, NetJets, Nick Leeson, pets.com, risk tolerance, Silicon Valley, sovereign wealth fund, time value of money, too big to fail, value at risk

It’s not easy and it’s not obvious and chances are if you ask a random person about it they will look at you with a blank stare and tell you to leave them alone. Another reason to pick the right mentor. I think your goal is to visualize and what the heck, actually draw a picture of how money flows or, as I like to say, sloshes around Wall Street. You need to see how the pieces are interconnected. Start with the asset managers on the buy side, the hedge funds, family offices, endowments, pensions, sovereign wealth funds, thrifts, insurance companies, venture capital firms, private equity firms, financial investors, rich dudes, who is servicing who and how does the money end up in the right hands. Then on the sell side, start connecting the dots between the bulge bracket firms, universal banks, broker dealers, wire houses, wealth platforms and intermediaries. And when a trade is executed, who touches it.


pages: 302 words: 86,614

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian

activist fund / activist shareholder / activist investor, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Myron Scholes, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading, zero-sum game

When Cowen decided to raise money for a fund, the Robert M. Bass Group, then a client of the firm, offered to provide Cowen with virtually all of the capital. After Cowen refused to take all of the Bass capital, the siblings decided to leave the firm and go work for Bass. “Once we got to the Bass organization, we realized it was a pretty unique place. It’s difficult now to fathom, but back then the only people who really had capital were wealthy family offices,” remembers Lasry. The Robert M. Bass Group, later called Keystone, Inc., had been known as a breeding ground for some of the world’s top private equity investors, including David Bonderman, who went on to found Texas Pacific Group (TPG), and Richard Rainwater. When Marc and Sonia joined the Bass Group, they were given a portfolio of $75 million to invest in trade claims, bank debt and senior bonds.

Investors appreciate that level of focus on the portfolio, which is part of the reason Avenue has been able to continue to raise new funds over the years. The firm’s investor base has undergone a dramatic evolution from its start in 1995, when its capital came from friends and family. At the end of 2011, public and corporate pension fund capital comprised over 50 percent of the firm’s assets. Foundations, endowments, family offices, and insurance companies made up much of the remainder, with less than one percent drawn from high-net-worth individuals. Charles Spiller, Director of the Pennsylvania Public School Employees Retirement System, started investing with Avenue after an introduction from New York Life in late 2000 and has seen a 10-year track record in their private equity portfolio of between 15 percent and 17 percent.


pages: 302 words: 95,965

How to Be the Startup Hero: A Guide and Textbook for Entrepreneurs and Aspiring Entrepreneurs by Tim Draper

3D printing, Airbnb, Apple's 1984 Super Bowl advert, augmented reality, autonomous vehicles, basic income, Berlin Wall, bitcoin, blockchain, Buckminster Fuller, business climate, carried interest, connected car, crowdsourcing, cryptocurrency, Deng Xiaoping, discounted cash flows, disintermediation, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, family office, fiat currency, frictionless, frictionless market, high net worth, hiring and firing, Jeff Bezos, Kickstarter, low earth orbit, Lyft, Mahatma Gandhi, Mark Zuckerberg, Menlo Park, Metcalfe's law, Metcalfe’s law, Mikhail Gorbachev, Minecraft, Moneyball by Michael Lewis explains big data, Nelson Mandela, Network effects, peer-to-peer, Peter Thiel, pez dispenser, Ralph Waldo Emerson, risk tolerance, Robert Metcalfe, Ronald Reagan, Rosa Parks, Sand Hill Road, school choice, school vouchers, self-driving car, sharing economy, short selling, Silicon Valley, Skype, smart contracts, Snapchat, sovereign wealth fund, stealth mode startup, stem cell, Steve Jobs, Tesla Model S, Uber for X, uber lyft, universal basic income, women in the workforce, Y Combinator, zero-sum game

Now, six years after founding Draper Associates, I had a good enough story to raise a venture capital fund from outside (non-family) investors. All I needed to do was find some good partners. I recruited John Fisher and Larry Kubal to join me. I knew Larry through my sister Becky, who went to Stanford’s Graduate School of Business with him. He had occasionally coinvested with me while I managed the SBIC. Larry agreed to work part time with me because he also was running a family office. Having a wealthy family office connected to us was helpful because we could commit to larger investments than we could make alone, and “wrestle above our weight class.” Larry had a great sense of humor, which would keep us laughing through our successes and our pitfalls. John Fisher was brilliant, ambitious and hardworking. His education included Phillips Exeter Academy, Harvard University and Harvard Business School.


pages: 146 words: 43,446

The New New Thing: A Silicon Valley Story by Michael Lewis

Albert Einstein, Andy Kessler, business climate, creative destruction, data acquisition, family office, high net worth, invention of the steam engine, invisible hand, Jeff Bezos, Marc Andreessen, Menlo Park, pre–internet, risk tolerance, Sand Hill Road, Silicon Valley, Silicon Valley startup, the new new thing, Thorstein Veblen, wealth creators, Y2K

He disliked stock brokersso much that he ignored their advice to diversify and kept all his wealth in Netscape and Healtheon. He disliked venture capitalists and investment bankers and, in general, the phalanx of financial intermediaries who sat between the creators of wealth and their just desserts. At first he decided that what he really wanted was what rich people have always had: a family office. The rich man's family office is normally a staff of people who do nothing but take care of the rich man's money. Money butlers. Pretty quickly, however, he realized he wanted more than a money butler. He wanted to be able to watch what his money butlers did. He wanted to be able to take in every aspect of his money at a glace, no matter where on earth he happened to be, and at what time. The Internet was perfectly suited to what he had in mind.


pages: 121 words: 31,813

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions by Lee Freeman-Shor

Black Swan, buy and hold, cognitive bias, collapse of Lehman Brothers, credit crunch, Daniel Kahneman / Amos Tversky, diversified portfolio, family office, I think there is a world market for maybe five computers, index fund, Isaac Newton, Jeff Bezos, Long Term Capital Management, loss aversion, Richard Thaler, Robert Shiller, Robert Shiller, rolodex, Skype, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, technology bubble, The Wisdom of Crowds, too big to fail, tulip mania, zero-sum game

, EFA, by Brad Barber and Terrance Odean (1999). 40 ‘Trading is hazardous to your wealth: the common stock investment performance of individual investors’, The Journal of Finance, by Brad Barber and Terrance Odean (2000). 41 Kahneman and Tversky (1979). 42 ‘Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers’, Journal of Consumer Research, by Ziv Carmon and Dan Ariely (2000). 43 The Psychology of Finance, by Lars Tvede (1999). 44 More Than You Know, by Michael Mauboussin (2006). 45 Mauboussin (2006). 46 Mean Genes, by Terry Burnham and Jay Phelan (2001). 47 Lynch (2000). 48 Thaler and Johnson (1990). 49 ‘Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency’, Journal of Finance, by Narasimhan Jegadeesh and Sheridan Titman (1993). 50 ‘Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?’, American Economic Review, by Robert Shiller (1981). 51 Druckenmiller is a very famous investor who achieved compounded returns of ~30% from 1986 to 2010 before announcing he was returning all outside investor capital from his Duquesne fund and forming a family office. 52 Schwager (1994). 53 Those of you with a keen eye will note that this was the same date as for Spirax-Sarco. The reason is simple. That’s when I gave him the money to invest. 54 ‘Best Ideas’, by Randolph Cohen, Christopher Polk, Bernhard Silli (2010). Available at SSRN: ssrn.com/abstract=1364827 55 Active weight, not absolute weight. 56 Cohen, Polk and Silli (2010).


pages: 354 words: 110,570

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World by Tom Wright, Bradley Hope

Asian financial crisis, Bernie Madoff, collapse of Lehman Brothers, colonial rule, corporate social responsibility, Credit Default Swap, Donald Trump, failed state, family office, forensic accounting, Frank Gehry, high net worth, Nick Leeson, offshore financial centre, Ponzi scheme, Right to Buy, risk tolerance, Snapchat, South China Sea, sovereign wealth fund

But his relations with Obaid soon deteriorated, as his young friend seemed paranoid and arrogant after the 1MDB deal, while at the same time failing to deliver the proposed millions. Seemingly intoxicated by the extent of his newfound wealth, Obaid began flying to Saudi Arabia and elsewhere in the Middle East on private jets and, like Low, renting yachts in the south of France. His brother suggested setting up a family office to manage all the money. To some observers, Obaid started to act erratically. He always had been a hypochondriac, complaining of vague illnesses, and after the money started flowing he wrote to the Mayo Clinic in the United States to get a full medical check-up, despite being in his midthirties. He began to party incessantly and put on weight. People who knew him said he flew into frequent rages.

The $2.2 billion acquisition of EMI, finalized a month earlier, was led by Sony Music Holdings, the Estate of Michael Jackson, and U.S. private equity giant Blackstone Group. Low’s Jynwel Capital had invested alongside Mubadala, the Abu Dhabi fund run by Khaldoon Al Mubarak. His share, just over $100 million, was by far his most legitimate-looking deal to date. Low had set up Jynwel with his brother, Szen, and told financiers it was his “family office,” investing his grandfather’s billions. His partners in the EMI deal had fallen for it. Low’s share, in truth, was financed by the 1MDB bonds that Goldman had sold for the fund. To hide the origin of the money, Low used an old trick, getting his associate Fat Eric to set up an offshore shell company called Blackstone Asia Real Estate Partners. This firm was designed to look like a bonafide subsidiary of the Blackstone Group but was controlled by Fat Eric, who worked for Low.


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

asset-backed security, backtesting, banking crisis, barriers to entry, beat the dealer, Bernie Madoff, Black-Scholes formula, British Empire, business cycle, buy and hold, Claude Shannon: information theory, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, Edward Thorp, family office, financial independence, fixed income, Flash crash, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Jones Act, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, quantitative easing, quantitative trading / quantitative finance, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

Ironically, based on the trades Lewis described, I drew a very different impression about the balance between luck and skill in driving the success of Cornwall Capital (Mai’s firm) than Lewis himself did. Lewis’s colorful narrative of Cornwall as a hedge fund started in a shed on a shoestring budget, trading a small brokerage account, gave no hint of the firm’s institutional context. The reality is a bit duller. Cornwall was originally founded as a family office to diversify the capital of Mai’s father, who ran AEA Investors, a prominent, long-standing private equity firm that was recently rated one of the 10 most consistent performing buyout fund managers in the world. Shortly after he started Cornwall, Mai was joined by Charlie Ledley, a former colleague from a private equity firm at which they had both worked. A third key principal, Ben Hockett, joined Cornwall in 2005 as head trader.

Although this particular trade was unusually profitable—Cornwall ultimately made about 80 times the initial premium they paid out for subprime default protection—it was entirely representative of the types of trades Cornwall seeks out. Beginning in May 2011, Cornwall switched to a new fund structure open to outside investors. Through the years, Mai had encountered several outstanding trade opportunities that could easily accommodate far more capital than his family office could invest. In a few of those instances, he explored the possibility of raising outside investor money to participate in the trade idea, but decided the lag involved was too long. The catalyst that finally convinced Mai to restructure the fund to accommodate investors was born of the frustration of being unable to participate in a rare pure arbitrage opportunity in 2008 because he lacked sufficient assets.1 Mai decided to open the fund to only a handful of like-minded, sophisticated investors with whom he could be reasonably transparent and share ideas, rather than seeking to maximize assets under management.

Based on the numbers in the book, it sounded like you multiplied your initial $110,000 stake more than a thousandfold, which sounds a bit incredulous. It is, though in fairness to Michael he had one major constraint in telling our story, which was that he had to leave my family out of it. My father has run one of the oldest leveraged buyout firms in the United States for over 20 years, and before that he ran the investment bank for Lehman Brothers. Cornwall Capital is a family office he and I formed together in 2002. The whole conceit of three dropouts lacking in direction and operating on a shoestring budget made good copy while preserving my family’s privacy, but it didn’t accurately reflect the fact that we had capital and a clear idea of how we wanted to evolve our investment approach. We did our first trade in my small Schwab account because we hadn’t finalized the structure of the family’s comingled investment vehicle.


pages: 493 words: 139,845

Women Leaders at Work: Untold Tales of Women Achieving Their Ambitions by Elizabeth Ghaffari

Albert Einstein, AltaVista, business cycle, business process, cloud computing, Columbine, corporate governance, corporate social responsibility, dark matter, family office, Fellow of the Royal Society, financial independence, follow your passion, glass ceiling, Grace Hopper, high net worth, knowledge worker, Long Term Capital Management, longitudinal study, performance metric, pink-collar, profit maximization, profit motive, recommendation engine, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley startup, Steve Ballmer, Steve Jobs, thinkpad, trickle-down economics, urban planning, women in the workforce, young professional

I got a great deal of drive and competitive verve from him. My mother was extremely supportive and always told me I could do anything I set my mind to. Those were the people who continued to give me strength throughout my early background and career. I have a wonderful husband, four great step-children, and two “feline” children. My step-kids range in ages from twenty-two to thirty-two years old. My husband, Stewart Smith, manages investments—the family office—for his family. He is very involved in philanthropy and gives generously of his time, skill, and money. Ghaffari: Do you find it easy to balance work and the rest of your life? Ferracone: I don’t see it as work-life balance. I see it as successfully blending work-life priorities. I work extremely hard and a lot of hours. The entrepreneurial thing kind of lends itself to this. It has no boundaries.

Laura Roden Founder and Managing Director, VC Privé, LLC Born in Los Angeles, California. Laura Roden is founder and managing director of VC Privé, LLC, a boutique investment bank that, since its establishment in January 2007, has raised money for high-quality, alternative asset funds such as venture capital funds, hedge funds, and distressed debt funds. Her firm specializes in marketing funds to private investors, including high-net-worth individuals, family offices, foundations, endowments, and independent financial advisors. Ms. Roden holds Series 7, 66, and 79 licenses to sell securities and provide investment advisory services. Previously, Ms. Roden was managing director of The Angels’ Forum, a leading association of individual and corporate early-stage investors, and was president and CEO of the Silicon Valley Association of Startup Entrepreneurs (SVASE), the largest nonprofit in Northern California dedicated to helping technology entrepreneurs.


pages: 431 words: 132,416

No One Would Listen: A True Financial Thriller by Harry Markopolos

backtesting, barriers to entry, Bernie Madoff, buy and hold, call centre, centralized clearinghouse, correlation coefficient, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, family office, financial thriller, fixed income, forensic accounting, high net worth, index card, Long Term Capital Management, Louis Bachelier, offshore financial centre, Ponzi scheme, price mechanism, quantitative trading / quantitative finance, regulatory arbitrage, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, statistical arbitrage, too big to fail, transaction costs, your tax dollars at work

“With the amount of trading Madoff would have to do,” he told Ocrant, “you’d see those fluctuations—and they aren’t there.” Point by point Ocrant confirmed Frank’s claims about Madoff. And just as had happened to us, the more he learned the more intrigued he became. Madoff’s name began slipping into most of his conversations. He was on the phone one afternoon with Hunt Taylor, the former chairman of the Cotton Exchange who was then managing the family office for the Stern family, owners of Hartz Mountain. Whatever the original purpose of the call, eventually Ocrant found himself asking the now-familiar question: “Have you ever heard about Bernie Madoff managing money?” “God,” Taylor responded. “It’s funny you should mention that, because I just came back from a conference, and me and a bunch of guys were sitting around the table talking about that.

The acknowledged Madoff feeder funds—New York-based Fairfield Sentry and Tremont Advisors’ Broad Market; Kingate, operated by FIM of London; and Swiss-based Thema—derive all the incentive fees generated by the program’s returns (there are no management fees), provide all the administration and marketing for them, raise the capital and deal with investors, says Madoff. Madoff Securities’ role, he says, is to provide the investment strategy and execute the trades, for which it generates commission revenue. [Madoff Securities also manages money in the program allocated by an unknown number of endowments, wealthy individuals and family offices. While Bernie Madoff refuses to reveal total assets under management, he does not dispute that the figure is in the range of $6 billion to $7 billion.] Madoff compares the firm’s role to a private managed account at a broker-dealer, with the broker-dealer providing investment ideas or strategies and executing the trades and making money off the account by charging commission on each trade.


pages: 496 words: 131,938

The Future Is Asian by Parag Khanna

3D printing, Admiral Zheng, affirmative action, Airbnb, Amazon Web Services, anti-communist, Asian financial crisis, asset-backed security, augmented reality, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Basel III, blockchain, Boycotts of Israel, Branko Milanovic, British Empire, call centre, capital controls, carbon footprint, cashless society, clean water, cloud computing, colonial rule, computer vision, connected car, corporate governance, crony capitalism, currency peg, deindustrialization, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, energy security, European colonialism, factory automation, failed state, falling living standards, family office, fixed income, flex fuel, gig economy, global reserve currency, global supply chain, haute couture, haute cuisine, illegal immigration, income inequality, industrial robot, informal economy, Internet of things, Kevin Kelly, Kickstarter, knowledge worker, light touch regulation, low cost airline, low cost carrier, low skilled workers, Lyft, Malacca Straits, Mark Zuckerberg, megacity, Mikhail Gorbachev, money market fund, Monroe Doctrine, mortgage debt, natural language processing, Netflix Prize, new economy, off grid, oil shale / tar sands, open economy, Parag Khanna, payday loans, Pearl River Delta, prediction markets, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, Ronald Reagan, Scramble for Africa, self-driving car, Silicon Valley, smart cities, South China Sea, sovereign wealth fund, special economic zone, stem cell, Steve Jobs, Steven Pinker, supply-chain management, sustainable-tourism, trade liberalization, trade route, transaction costs, Travis Kalanick, uber lyft, upwardly mobile, urban planning, Washington Consensus, working-age population, Yom Kippur War

The Gulf countries, Iran, and Turkey add nearly one hundred billionaires to Asia’s tally. With 85 percent of Asia’s wealthy being first generation, the next two decades will witness one of the largest wealth transfers in history. Asia will soon have more billionaires and millionaires and a larger middle class than any other region. The wealth management industry is thriving in Asia as hundreds of new family offices set up in key cities, with banks often mere custodians. As one executive of a European bank put it, “In the US, American banks face little competition to service wealthy clients. In Europe, both European and American banks compete for the market. And in Asia, European, American, and Asian banks are all competing for wealthy customers. All our margins get squeezed, but at the same time it unlocks trillions of dollars of savings to be profitably invested.”

China now has more than fifty “unicorn” companies with billion dollar–plus valuations (slightly less than the United States), while India has about a dozen and ASEAN just under ten, with many more such pre-IPO companies gathering steam. The global asset management industry is only about 5 percent exposed to Asia, something Western institutional investors—from asset managers and pension funds to family offices—are scrambling to correct as they search for high-yield fixed-income investments such as Asian currencies, sovereign debt, and corporate bonds. Tencent, Alibaba, and Baidu already rank among the largest companies in the world by market cap, but their rapid expansion of customer base and services makes them attractive as core elements of a Western retiree’s portfolio to augment the struggling blue-chip companies such as GE and HP.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

"Robert Solow", 1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, commoditize, complexity theory, continuation of politics by other means, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, digital map, disruptive innovation, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, Ethereum, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, LNG terminal, low cost airline, low cost carrier, low earth orbit, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, plutocrats, Plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

Like the sturdy iron Silk Roads stretching across Eurasia, these vectors form a new “permanent capital” with longer time horizons, greater ability to withstand volatility, and stronger appetite to invest globally. The world’s billionaires, whose total number has doubled since the financial crisis to more than two thousand, are emblematic of this trend. Billionaires are both individuals and instividuals—institutional individuals—that can operate on the scale of companies through their own family offices. Their financial orbits represent the world’s single largest pool of capital at $46 trillion. They are joined by pension funds whose investable capital is over $40 trillion. While European pension portfolios lead the way in infrastructure investments abroad, Asian funds (which represent half of the top twenty) are aggressively joining them in scouring ever more globally for returns to meet their rising domestic obligations, along the way lobbying aggressively for China, India, Nigeria, Turkey, Mexico, and others to raise their quotas for foreign investment in specific sectors such as real estate, telecoms, financial services, and infrastructure.9 Insurance funds represent another $30 trillion in assets that have been historically rooted in national portfolios but today have also become more like capital networks looking for greater exposure to local markets.

Furthermore, countries that export lucrative services such as computer programming, back-office research, and medical X-ray consultation get the double bonus of attracting far more foreign investment into these sectors: more investment in, more exports out. The cost of financing technology companies has also plummeted. Venture capitalists and Wall Street banks now coexist in a much larger funding ecosystem alongside family offices, angel investors, and crowd-funding platforms such as Kickstarter, collectively delivering more capital more effectively than cumbersome public markets did in the past. But the new economy needs the old economy: Digital services advance through modernized infrastructure. It is the combination of improved physical infrastructure and e-commerce that makes the supply chain world an increasingly seamless physical-virtual hybrid marketplace of goods, services, payments, and delivery.


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Berlin Wall, Bernie Madoff, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, high net worth, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, margin call, means of production, Menlo Park, merger arbitrage, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Ponzi scheme, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sand Hill Road, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, technology bubble, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, underbanked, Vanguard fund, working poor, yield curve

Separate account management is usually highly customized and responsively provided, which means that qualifying clients normally find such investment services attractive and convenient. In the past few decades, a broad system of private wealth management has been created, bringing the features of a family office to a wider, albeit still limited, audience. This system takes into account the complicated needs of wealthy individuals, providing for estate planning and, importantly, keeping an asset base secure. Unlike a dedicated family office, private banking does not involve an entire organization devoted to the wealth of a single individual or family. However, private banking does require investors to have a high level of assets, and it provides personally tailored investment advising and other services that commercial bank branches and retail brokerages do not offer.52 J.


Trend Commandments: Trading for Exceptional Returns by Michael W. Covel

Albert Einstein, Bernie Madoff, Black Swan, business cycle, buy and hold, commodity trading advisor, correlation coefficient, delayed gratification, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, family office, full employment, Lao Tzu, Long Term Capital Management, market bubble, market microstructure, Mikhail Gorbachev, moral hazard, Myron Scholes, Nick Leeson, oil shock, Ponzi scheme, prediction markets, quantitative trading / quantitative finance, random walk, Sharpe ratio, systematic trading, the scientific method, transaction costs, tulip mania, upwardly mobile, Y2K, zero-sum game

How could Swensen not understand a simple trend following system? This is a game of misses. The guy who misses the best is going to win.3 One trend trader countered: “If you are going to give a systems trader the label ‘black box’ then all those guys predicting the future, at least have the consistency to call them the crystal ball.”4 Wall Street needs a spin or a narrative to sell, and they all sell similar stories. Pension funds, family offices, fund of funds, and others who allocate money, like to herd. These gatekeepers always move in lockstep. They blindly follow the worst investing schemes, and continually knock sound strategies such as trend following—with terms like black box.5 Why? So many are motivated by what matters least. Namely, quick money (the quicker the better) at whoever’s expense. That’s how Many on Wall Street don’t want the financial world got so close to above average returns.


pages: 317 words: 71,776

Inequality and the 1% by Danny Dorling

Affordable Care Act / Obamacare, banking crisis, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Branko Milanovic, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, collective bargaining, conceptual framework, corporate governance, credit crunch, David Attenborough, David Graeber, delayed gratification, Dominic Cummings, double helix, Downton Abbey, en.wikipedia.org, Etonian, family office, financial deregulation, full employment, Gini coefficient, high net worth, housing crisis, income inequality, land value tax, longitudinal study, low skilled workers, lump of labour, mega-rich, Monkeys Reject Unequal Pay, Mont Pelerin Society, mortgage debt, negative equity, Neil Kinnock, Occupy movement, offshore financial centre, plutocrats, Plutocrats, precariat, quantitative easing, race to the bottom, Robert Shiller, Robert Shiller, TaskRabbit, The Spirit Level, The Wealth of Nations by Adam Smith, trickle-down economics, unpaid internship, very high income, We are the 99%, wealth creators, working poor

But to secure such goals requires some work and training. According to the New York Times, awaydays for the children of the extremely rich are now arranged that cover ‘topics as various as financial literacy, prenuptial agreements and managing family dynamics [and] are offered by large financial institutions like Citi Private Bank, business schools and organizations for wealthy families like the Family Office Exchange and the Institute for Private Investors’.33 These are events in which wealthy children can get together and feel comfortable with their wealth, and learn how to hold on to their family money – including protecting it from their spouses. Some top private banks now include psychologists as part of their private client banking package. Included in their advice is a suggestion that you meet with your parents at your country club, not their home (it is less emotive).


pages: 227 words: 71,675

Rules for Revolutionaries: How Big Organizing Can Change Everything by Becky Bond, Zack Exley

battle of ideas, Bernie Sanders, call centre, centre right, cognitive dissonance, crowdsourcing, declining real wages, Donald Trump, family office, fixed income, full employment, hiring and firing, hydraulic fracturing, immigration reform, income inequality, Kickstarter, mass incarceration, Naomi Klein, Occupy movement, oil shale / tar sands, plutocrats, Plutocrats, randomized controlled trial, Skype, telemarketer, union organizing

We also see it in the immigration movement (in particular the Dreamers), the movement to defend black lives, and to some degree in movements on the right such as the campaign of Ron Paul in 2004, the rise of the Tea Party, and even some elements of the madness that was the Trump campaign. Big organizing is what leaders do in movements that mobilize millions of people. Not everyone in these movements is a leader, but in big organizing, volunteer leaders emerge by the thousands from every classroom, family, office and work area, neighborhood, and prison block. The movement doesn’t need to awaken or even train them—these leaders emerge ready to make change, and they bring their full selves and life experience to the task of building a movement that works. Our families, workplaces, schools, social networks, and other institutions are all inherently political. And in the current social context, people don’t need to be awakened politically—they are ready to get to work to make change.


pages: 280 words: 79,029

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

Affordable Care Act / Obamacare, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, margin call, Mark Zuckerberg, McMansion, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, Thales of Miletus, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

Lenders were often no better: like other auction sites, Prosper found that there was a small group of people whose goal was to win the auction no matter how low the rate they received as a result. This sort of foolishness is not just restricted to retail investors. MarketInvoice, an electronic platform in London that allows small firms to sell off their outstanding invoices at a discount, also used to run auctions. Its investors were not members of the public, but high-net-worth individuals, family offices, and specialist funds. Even so, it observed exactly the same kind of behavior, with investors determined to invest their allocation of money no matter what and bidding discounts down to minuscule levels. Prosper’s experiment with an auction system has long since ended. It now assesses borrowers itself and puts them into risk bands that come with a preordained interest rate attached. Lending Club, Zopa, MarketInvoice, and others do the same thing.


Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game by Walker Deibel

barriers to entry, Clayton Christensen, commoditize, deliberate practice, discounted cash flows, diversification, Elon Musk, family office, financial independence, high net worth, intangible asset, inventory management, Jeff Bezos, knowledge worker, Lean Startup, Mark Zuckerberg, meta analysis, meta-analysis, Network effects, new economy, Peter Thiel, risk tolerance, risk/return, rolodex, software as a service, Steve Jobs, supply-chain management, Y Combinator

The financing of these deals is typically done in one fell swoop, with you bringing a “down payment” or “equity infusion” and the bank providing the balance. In addition, raising money from a bank also means that you get to own 100 percent of the company yourself. If you require investors or other backing for the initial equity infusion, you have options. You can bring on partners, raise from friends and family, or pitch family offices or angel investors who will be attracted to the better economics when compared to startups. There has also been an increasing trend in new search funds. These funds are dedicated to helping acquisition entrepreneurs buy businesses. These funds can also assist in helping you acquire significantly larger companies than you could do on your own, effectively allowing you to stretch well into the middle market (which I’ll define here, as those companies generating between $5 and $100 million in 4 revenue ) or provide additional capital to lower the debt profile.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

LTCM also approached Julian Robertson of Tiger Management, but he declined. On August 26, Eric Rosenfeld and John Meriwether asked Warren Buffett for money. The next morning, Larry Hilibrand went to Omaha, Nebraska, to talk to Buffett. Buffett declined to invest because he thought the portfolio was too complicated. Myron Scholes called William Sharpe, another Nobel prizewinner in economics, to ask him for money from a family office that Bill Sharpe was advising. Again, LTCM’s trades looked too complicated. Despite the many negative responses, it seemed that LTCM had enough commitments for capital. On the anticipated closing day, August 31, George Soros’s Quantum Fund pulled out its large stake: $500 million. That was it. LTCM was desperate. Who would LTCM call next? In the end, a letter would seal its fate. The Meriwether Letter LTCM ended 1997 with $4.668 billion in capital; the partners controlled a little more than $2 billion.

To classify as a foreign private advisor means to have no place of business in the United States fewer than 15 U.S.-based clients and investors in the funds, have assets under management attributable to U.S. clients of less than $25 million or a higher amount approved by the SEC, and do not advertise themselves to the U.S. public as an investment advisor. Third, advisors to small business companies and family offices are exempt. Finally, advisors to one or more private funds with less than $150 million will not have to register, but will still have to file reports with the SEC. These rules will affect roughly 20% of the hedge fund world in terms of the number of hedge funds and about 97% in terms of assets under management. The registration will require hedge funds that qualify to report total assets under management, types of assets held, use of leverage, counterparty credit exposure, trading and investment positions, trading practices, valuation policies and practices, side letters or arrangement trading which treats different investors differently, and information the SEC deems to be in the public interest or required for systemic risk monitoring.


pages: 227 words: 80,633

James Acaster's Classic Scrapes - the Hilarious Sunday Times Bestseller by James Acaster

family office

It wasn’t ideal – these people had just seen me die quite the death. On the plus side, Christians love a good resurrection. So back we went, safe in the knowledge that as Christians they were contractually obliged to show us kindness and mercy and give us shelter for the evening. And that they did. A very kind and very merciful family put us up for the night. They were lovely. I stayed in the spare room and George slept on the pull-out bed in the family office. The next morning we had breakfast with the nice family before leaving. I asked the dad what he did for a living. ‘I’m a GP,’ he replied, while buttering his toast. George pointed at him. ‘I knew you were a doctor,’ he declared confidently, ‘because before I went to sleep last night I was looking through your letter rack in the office and I found a photo of a breast.’ There was a long pause, then the doctor went, ‘Hmmm,’ and then we absolutely had to leave.


pages: 291 words: 90,771

Upscale: What It Takes to Scale a Startup. By the People Who've Done It. by James Silver

Airbnb, augmented reality, Ben Horowitz, blockchain, business process, call centre, credit crunch, crowdsourcing, DevOps, family office, future of work, Google Hangouts, high net worth, hiring and firing, Jeff Bezos, Kickstarter, Lean Startup, Lyft, Mark Zuckerberg, minimum viable product, Network effects, pattern recognition, ride hailing / ride sharing, Silicon Valley, Skype, Snapchat, software as a service, Uber and Lyft, uber lyft, women in the workforce, Y Combinator

Yes, of course, VCs investing exorbitant sums of money, large multimillion-dollar sums, into a business - or even individual [investors] doing that - massively turns up the pressure dial. And what many startups perhaps don’t see is that those individuals are under even more pressure from their LPs. Those investors will be under a huge amount of pressure from the pension funds or the institutional investors or the family offices or the fund of funds which have given them $100m, $500m or even a billion dollars. That pressure just kind of trickles down, and it does make honesty exceptionally hard. ‘But you, as a founder, have chosen that route - and that narrative is quite clear now. In a fairly well-developed startup ecosystem, people know that if you’re going to go down that VC path, it’s going to be really hard work.


pages: 268 words: 81,811

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan

algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, Donald Trump, Elliott wave, eurozone crisis, family office, Flash crash, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, margin call, market design, market microstructure, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, Ralph Nelson Elliott, Ronald Reagan, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Tobin tax, tulip mania, yield curve, zero-sum game

Nav erected an impenetrable wall between his home life and his business affairs, and when Daljit, his mother, left the house each morning to work behind the till at a local chemist, or Nachhattar, his father, walked to the doctor’s office to pick up a prescription, they did so with no inkling that their son was a multimillionaire. Money for Nav was an abstraction, and the more of it that flooded in, the more he turned to MacKinnon and Dupont for guidance. By now the pair had taken to describing themselves as Nav’s “family office”—a kind of one-stop shop that handles every aspect of a high-net-worth individual’s financial and investment affairs—and not long after the wind deal was finalized, they introduced him to another opportunity, this one involving a mysterious young Mexican businessman named Jesus. Jesus Alejandro Garcia Alvarez was the owner and CEO of a Zurich-based company called IXE, an Aztec word apparently meaning “one who shows their face and keeps their word.”


pages: 274 words: 81,008

The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything by Jason Kelly

activist fund / activist shareholder / activist investor, barriers to entry, Berlin Wall, call centre, carried interest, collective bargaining, corporate governance, corporate raider, Credit Default Swap, diversification, Fall of the Berlin Wall, family office, fixed income, Goldman Sachs: Vampire Squid, Gordon Gekko, housing crisis, income inequality, late capitalism, margin call, Menlo Park, Occupy movement, place-making, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Rubik’s Cube, Sand Hill Road, shareholder value, side project, Silicon Valley, sovereign wealth fund

A 1992 story described Bonderman as “a facile negotiator and deal maker with a finely honed sense of moral outrage and persuasion.”4 His persuasion worked to great effect in Fort Worth. Bonderman helped prevent the freeway project, winning the admiration of Robert Bass, who was mulling a way to turn his inherited fortune into something even bigger, following the model of his older brother, Sid, who’d created a family office of his own, working with an investor named Richard Rainwater. Bonderman joined Robert Bass, eventually becoming the chief operating officer of the Robert M. Bass Group. As Bonderman and Bass began to assemble a team to sniff out deals, Bonderman was introduced to a young investment banker named Jim Coulter. Not yet 30, Coulter was a farm boy who earned an engineering degree at Dartmouth and went on to get an MBA from Stanford.


pages: 312 words: 91,538

The Fear Index by Robert Harris

algorithmic trading, backtesting, banking crisis, dark matter, family office, Fellow of the Royal Society, fixed income, Flash crash, God and Mammon, high net worth, implied volatility, mutually assured destruction, Neil Kinnock, Renaissance Technologies, speech recognition

‘Should we take precautions on your behalf as well?’ Quarry laughed. ‘The only thing that keeps me awake at night is the thought of a paternity suit.’ ‘RIGHT,’ SAID QUARRY, when Genoud had gone, ‘let’s talk about this presentation – if you’re still sure you’re up for it?’ ‘I’m up for it.’ ‘Okay, thank God for that. Nine investors – all existing clients as agreed. Four institutions, three ultra-high net worths, two family offices, and a partridge in a pear tree.’ ‘A partridge?’ ‘Okay, not a partridge. There is no partridge, I concede that.’ Quarry was in great high spirits. If he was three parts gambler he was also one part salesman, and it was a while since that crucial part of him had been allowed its head. ‘Ground rules are: first, they have to sign a non-disclosure agreement regarding our proprietary software, and second, they’re each permitted to bring in one designated professional adviser.


pages: 304 words: 91,566

Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption by Ben Mezrich

"side hustle", airport security, Albert Einstein, bank run, Ben Horowitz, bitcoin, blockchain, Burning Man, buttonwood tree, cryptocurrency, East Village, El Camino Real, Elon Musk, family office, fault tolerance, fiat currency, financial innovation, game design, Isaac Newton, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, new economy, offshore financial centre, paypal mafia, peer-to-peer, Peter Thiel, Ponzi scheme, QR code, Ronald Reagan, Ross Ulbricht, Sand Hill Road, Satoshi Nakamoto, Schrödinger's Cat, self-driving car, side project, Silicon Valley, Skype, smart contracts, South of Market, San Francisco, Steve Jobs, transaction costs, zero-sum game

He’d cofounded Jimmy Choo, a high-fashion shoe company, with his ex-wife Tamara Mellon, whom he’d met at a Narcotics Anonymous meeting. In 2017, Jimmy Choo was bought for over a billion dollars by Michael Kors Holdings. Few people in the world understood the cross-section of the finance, fashion, entertainment, and politics better than Matthew Mellon II. Mellon fit perfectly into Tyler and Cameron’s ongoing Bitcoin tour. Although they usually met with institutions like hedge funds, proprietary trading firms, family offices, and other financial companies, they’d decided to expand their outreach leading up to the Bitcoin 2013 conference to anyone interesting enough, and interested enough, to take their calls. It was a strategy that had landed them in front of some pretty spectacular people. Only days earlier, they’d dined with Richard Branson, the Virgin billionaire, at the Soho Beach House in Miami. At the dinner table, they’d used some of their bitcoin to prepurchase $250,000 tickets on Branson’s Virgin Galactic, a suborbital rocket cruise.


Concentrated Investing by Allen C. Benello

activist fund / activist shareholder / activist investor, asset allocation, barriers to entry, beat the dealer, Benoit Mandelbrot, Bob Noyce, business cycle, buy and hold, carried interest, Claude Shannon: information theory, corporate governance, corporate raider, delta neutral, discounted cash flows, diversification, diversified portfolio, Edward Thorp, family office, fixed income, high net worth, index fund, John von Neumann, Louis Bachelier, margin call, merger arbitrage, Paul Samuelson, performance metric, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, survivorship bias, technology bubble, transaction costs, zero-sum game

Without all the facts that a research analyst has, and without the impressions that analysts get from meeting with managements, and studying them closely, fund managers can’t make good investment decisions. The experience showed Greenberg the type of fund manager he wanted to be. Arthur Ross’s Tennis Shoes After five years at Morgan Guaranty, Greenberg saw that he was not going to learn how to manage money by remaining at the firm. He wanted to work for someone he could learn from. He joined the family office of Central National-Gottesman, which was based in New York and run by a littleknown money manager named Arthur Ross. Greenberg thought he was a “brilliant, brilliant investor.”30 Nobody’s ever heard of him because he handled private money and he didn’t get written up in books or get quoted in the newspapers, but he was a really phenomenal investor. The story was that one of the Gottesman family members came into his office one day and said, “Arthur, what’s the secret to your success?”


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

The fact is, currency wars are fought globally in all major financial centers at once, twenty-four hours per day, by bankers, traders, politicians and automated systems—and the fate of economies and their affected citizens hang in the balance. Participation in currency wars today is no longer confined to the national issuers of currency and their central banks. Involvement extends to multilateral and global institutions such as the IMF, World Bank, Bank for International Settlements and United Nations, as well as private entities such as hedge funds, global corporations and private family offices of the superrich. Whether as speculators, hedgers or manipulators these private institutions have as much influence over the fate of currencies as the nations that issue them. To see that the battle lines are global, not neatly confined to nation-states, one need only consider the oft-told story of the hedge fund run by George Soros that “broke the Bank of England” in 1992 on a massive currency bet.


pages: 335 words: 96,002

WEconomy: You Can Find Meaning, Make a Living, and Change the World by Craig Kielburger, Holly Branson, Marc Kielburger, Sir Richard Branson, Sheryl Sandberg

Airbnb, Albert Einstein, barriers to entry, blood diamonds, business intelligence, business process, carbon footprint, clean water, cleantech, Colonization of Mars, corporate social responsibility, Downton Abbey, Elon Musk, energy transition, family office, future of work, global village, inventory management, James Dyson, job satisfaction, Kickstarter, market design, meta analysis, meta-analysis, microcredit, Nelson Mandela, Occupy movement, pre–internet, shareholder value, sharing economy, Silicon Valley, Snapchat, Steve Jobs, telemarketer, The Fortune at the Bottom of the Pyramid, working poor, Y Combinator

We concentrated on the following key areas: Nature and measurability of impact, and how this might evolve Achievability of the go-to-market strategy, particularly across developed and developing markets Intentions and motivations of our co-investors, particularly the lead investor in this seed funding round It is the final point that's worth dwelling on. “Intentions and motivations of our co-investors” is very close to the fundamental principles we use to invest under at Virgin in the broader sense. As a multifaceted family office with investments in sectors ranging from financial services to space tourism, we have always been very keen to bring in co-investors who align with our goals, but who also bring sector-specific expertise. Infant Mortality in the Developing World: A Tragedy in Numbers According to a World Health Organization (WHO) analysis, an estimated 15 million babies are born prematurely each year (less than 37 completed weeks of gestation), and the number is rising.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

And thank you to my colleague and friend, Jonathan Tepper, for the opportunity to be involved in this project. About the Authors JONATHAN TEPPER is the coauthor of Endgame, a book on the sovereign debt crisis, and Code Red, a book on unconventional monetary policy after the global financial crisis. Jonathan is founder of Variant Perception, a macroeconomic research group that caters to hedge funds, banks, and family offices. Jonathan has worked as an equity analyst at SAC Capital and as a vice president in proprietary trading at Bank of America. Jonathan is a founder of Demotix, a citizen-journalism photo agency. In 2012 he and his partner Turi Munthe sold Demotix to Corbis, which was owned by Bill Gates. He received a BA with highest honors in history and honors in economics from the University of North Carolina at Chapel Hill.


The King of Oil by Daniel Ammann

accounting loophole / creative accounting, anti-communist, Ayatollah Khomeini, banking crisis, Berlin Wall, Boycotts of Israel, business intelligence, buy low sell high, energy security, family office, Johann Wolfgang von Goethe, Mikhail Gorbachev, Nelson Mandela, oil shock, peak oil, purchasing power parity, Ronald Reagan, trade liberalization, transaction costs, transfer pricing, Upton Sinclair, Yom Kippur War

It’s impossible to think of one without the other,” said a friend who has known both of them well for many years. This is primarily—but not solely—connected to Green’s skills as a traffic manager. It was Pinky, as all his acquaintances call him, who was able to make the crucial contacts in Iran. These contacts formed the basis for the company that would become Marc Rich + Co. AG. Iran played such an important role in Green’s career that he named the family office, i.e., a private company managing the family wealth, that he constructed after his retirement, Yeshil Management AG. Yeshil is the Farsi word for green. Pinky Green was indicted in 1983 on exactly the same charges as Marc Rich, and he was pardoned in 2001 by President Bill Clinton at exactly the same time. Nevertheless, he has to a large extent managed to keep out of the headlines. Googling his name turns up a mere 6,710 hits, compared with a whopping 230,000 hits for Marc Rich.4 Even his opponents can only find nice things to say about him.


pages: 330 words: 99,044

Reimagining Capitalism in a World on Fire by Rebecca Henderson

Airbnb, asset allocation, Berlin Wall, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, collaborative economy, collective bargaining, commoditize, corporate governance, corporate social responsibility, crony capitalism, dark matter, decarbonisation, disruptive innovation, double entry bookkeeping, Elon Musk, Erik Brynjolfsson, Exxon Valdez, Fall of the Berlin Wall, family office, fixed income, George Akerlof, Gini coefficient, global supply chain, greed is good, Hans Rosling, Howard Zinn, Hyman Minsky, income inequality, index fund, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, Kickstarter, Lyft, Mark Zuckerberg, means of production, meta analysis, meta-analysis, microcredit, mittelstand, Mont Pelerin Society, Nelson Mandela, passive investing, Paul Samuelson, Philip Mirowski, profit maximization, race to the bottom, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, sovereign wealth fund, Steven Pinker, stocks for the long run, Tim Cook: Apple, total factor productivity, Toyota Production System, uber lyft, urban planning, Washington Consensus, working-age population, Zipcar

It’s nearly always the people on the ground who know what can be done, not the people in the corner office. If you’re a consultant, push your clients to think about the risks and opportunities that the big problems represent. Be the catalyst for change in how they think about the world. If you’re an accountant, do the same thing. Help rewire the capital markets. Work for an impact investor or a family office or a venture capitalist or a private equity firm that understands that there’s lots of money to be made in saving the world. Ray Rothrock, an old friend who works at Venrock Ventures, helped raise hundreds of millions of dollars to fund a company called Tri Alpha Energy that is developing a fusion-based technology that could deliver commercially competitive baseload electric power.25 Work for an NGO and shame firms into changing—as Greenpeace does, or help them understand how to go about doing it—as organizations like Proforest or Leaders’ Quest do.26 Michael Peck founded 1worker1vote to support worker-owned cooperatives all over the country.


pages: 459 words: 118,959

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff by Christine S. Richard

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, banking crisis, Bernie Madoff, Blythe Masters, buy and hold, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Ponzi scheme, profit motive, short selling, statistical model, white flight, zero-sum game

It was from Ackman and filled with books: Graham and Dodd’s Security Analysis, Peter Lynch’s One Up on Wall Street, Benjamin Graham’s Intelligent Investor, Lawrence Cunningham’s The Essays of Warren Buffett, and Thornton O’glove’s Quality of Earnings. These were Ackman’s favorite books on investing, and he wanted White to read them all. Ackman made his reputation on Wall Street as an activist investor, a high-profile role that requires a knack for showmanship. But those who know Ackman well say he is an analyst at heart. “He is the smartest analyst I’ve ever met,” says Rafael Mayer, managing director of Khronos LLC, a family office and fund of funds investor, and a friend of Ackman’s. “He looks at something and he just decomposes it.” That process began with questions, lots of questions, including the one Ackman had badgered White with so many times while they were fishing: “Why?” It was also the question Ackman had tried to answer when he looked at the MBIA reinsurance transaction now being investigated by regulators.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

"Robert Solow", affirmative action, Albert Einstein, asset allocation, backtesting, beat the dealer, Black Swan, Black-Scholes formula, Bonfire of the Vanities, butterfly effect, commoditize, commodity trading advisor, computer age, computerized trading, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, Edward Thorp, family office, financial innovation, fixed income, frictionless, frictionless market, George Akerlof, implied volatility, index arbitrage, intangible asset, Jeff Bezos, John Meriwether, London Interbank Offered Rate, Long Term Capital Management, loose coupling, margin call, market bubble, market design, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shock, Paul Samuelson, Pierre-Simon Laplace, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Shiller, rolodex, Saturday Night Live, selection bias, shareholder value, short selling, Silicon Valley, statistical arbitrage, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, William Langewiesche, yield curve, zero-coupon bond, zero-sum game

In any case, Scribe Reports was a business that was not well suited to marketing while I was at Moore, because Moore was a large and strong 201 ccc_demon_165-206_ch09.qxd 7/13/07 2:44 PM Page 202 A DEMON OF OUR OWN DESIGN competitor for investor dollars for most of my potential clients. I went from Moore to Ziff Brothers Investments, and while there I continued to pursue this venture. ZBI traded only with internal funds—those of the Ziff family, of publishing fame—in what is termed in the investment world a family office; it was never chasing after other hedge funds’ investor dollars. Not long after I joined ZBI I moved from risk management to portfolio management. I redirected the efforts of a small group of PhDs who had been providing quantitative analysis for the traditional portfolio managers toward running an internal portfolio based on quantitative trading models. While the trading center for Moore was macro strategies, at ZBI the center was equities, and the portfolio I managed was an equity portfolio.


pages: 401 words: 115,959

Philanthrocapitalism by Matthew Bishop, Michael Green, Bill Clinton

Albert Einstein, anti-communist, barriers to entry, battle of ideas, Bernie Madoff, Bob Geldof, Bonfire of the Vanities, business process, business process outsourcing, Charles Lindbergh, clean water, cleantech, corporate governance, corporate social responsibility, Dava Sobel, David Ricardo: comparative advantage, don't be evil, family office, financial innovation, full employment, global pandemic, global village, God and Mammon, Hernando de Soto, high net worth, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Dyson, John Harrison: Longitude, joint-stock company, knowledge economy, knowledge worker, Live Aid, lone genius, Marc Andreessen, market bubble, mass affluent, microcredit, Mikhail Gorbachev, Nelson Mandela, new economy, offshore financial centre, old-boy network, peer-to-peer lending, performance metric, Peter Singer: altruism, plutocrats, Plutocrats, profit maximization, profit motive, Richard Feynman, risk tolerance, risk-adjusted returns, Ronald Coase, Ronald Reagan, shareholder value, Silicon Valley, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade liberalization, transaction costs, trickle-down economics, wealth creators, winner-take-all economy, working poor, World Values Survey, X Prize

Putting philanthropic capital into what is called a foundation in the United States, and a charitable trust in the United Kingdom, earns a tax benefit for the whole donation. Some people give to the foundation as its need for the money arises, others endow the foundation up front with a large sum of money that can be given away over many years. Investment income earned on the endowment in future years is also typically exempt from tax. For the seriously wealthy, a foundation can be run out of a family office, along with their other financial affairs, or independently staffed with philanthropy professionals (so-called philanthropoids or philanthrocrats). Most foundations limit themselves to giving out money to support the work of other organizations (charities and other NGOs, hospitals, and so forth), and in the best cases, monitoring how the money is used. But a few choose to run their own projects and programs.


pages: 443 words: 116,832

The Hacker and the State: Cyber Attacks and the New Normal of Geopolitics by Ben Buchanan

active measures, Bernie Sanders, bitcoin, blockchain, borderless world, Brian Krebs, British Empire, Cass Sunstein, citizen journalism, credit crunch, cryptocurrency, cuban missile crisis, data acquisition, Donald Trump, drone strike, Edward Snowden, family office, hive mind, Internet Archive, Jacob Appelbaum, John Markoff, John von Neumann, Julian Assange, Kickstarter, kremlinology, MITM: man-in-the-middle, Nate Silver, profit motive, RAND corporation, ransomware, risk tolerance, Robert Hanssen: Double agent, rolodex, Ronald Reagan, Silicon Valley, South China Sea, Steve Jobs, Stuxnet, technoutopianism, undersea cable, uranium enrichment, Vladimir Vetrov: Farewell Dossier, WikiLeaks, zero day

“Russia, if you’re listening,” he crowed at a July 27 press conference, “I hope you’re able to find the thirty thousand emails that are missing,” in obvious reference to the emails that had been selectively deleted from the unsecure private server Clinton used as secretary of state in President Obama’s first term.39 Within five hours, the Russians launched spear-phishing attempts at the Clintons’ family office accounts for what appears to be the first time.40 The second notable group is other political campaigns. While most ignored the leaks, one actively reached out to the GRU for information they might be able to use. Aaron Nevins, a Republican consultant to Florida candidates, contacted Guccifer through Twitter, writing, “Feel free to send any Florida based information.”41 The Russians complied, sending over several gigabytes of voter turnout information and population modeling taken from the DCCC.


Hedgehogging by Barton Biggs

activist fund / activist shareholder / activist investor, asset allocation, backtesting, barriers to entry, Bretton Woods, British Empire, business cycle, buy and hold, diversification, diversified portfolio, Elliott wave, family office, financial independence, fixed income, full employment, hiring and firing, index fund, Isaac Newton, job satisfaction, margin call, market bubble, Mikhail Gorbachev, new economy, oil shale / tar sands, paradox of thrift, Paul Samuelson, Ponzi scheme, random walk, Ronald Reagan, secular stagnation, Sharpe ratio, short selling, Silicon Valley, transaction costs, upwardly mobile, value at risk, Vanguard fund, zero-sum game, éminence grise

We have chosen to have a clause in our partnership agreement that prohibits withdrawals for the first year. After that, investors can get their money on a quarterly basis. There is also a provision for emergency withdrawals. However, the Swiss make no bones about not liking our first-year lockup. Then there is the rest of the crowd, the amateurs, mostly wealthy individuals and small, wannabe funds of funds. Germans with bulging eurobellies from family offices mingle with bloated Arabs in pale suits and white shirts, their handshakes as cool and clammy as snakeskin. Former investment bankers exchange distinguished lies with portly exdiplomats, permanently deformed by self-importance. Wrecked old Texans with faces like road maps, sour breath, and fitted Hawaiian shirts chatter with fast talking private wealth bankers from Miami with pompadours and slicked back hairdos.


pages: 654 words: 120,154

The Firm by Duff McDonald

"Robert Solow", Asian financial crisis, borderless world, collective bargaining, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, family office, financial independence, Frederick Winslow Taylor, income inequality, invisible hand, Jeff Bezos, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, Mahatma Gandhi, Nelson Mandela, new economy, pets.com, Ponzi scheme, Ralph Nader, risk tolerance, risk-adjusted returns, shareholder value, Silicon Valley, Steve Jobs, supply-chain management, The Nature of the Firm, young professional

Between 1976 and 1988, it opened fifteen offices around the globe, including Boston, Madrid, Lisbon, and Stuttgart. McKinsey partners had always done well; now top directors were pulling down as much as $500,000 a year. That’s the kind of thing that happens when your income growth far outstrips growth in head count. The firm had accumulated so much money that in 1985 it established the McKinsey Investment Office, which operated as a kind of internal family office/fund of funds from that point forth. At a later conference of firm partners in Boca Raton, Marvin Bower asked his partners: “Do you know when you’re making too much money? When you need someone else to manage it for you.” While those in attendance nodded in agreement with the old man, they still wanted to know what their bonuses would be that year. Everyone wanted to talk to McKinsey, in part because its massive scope certainly did give it perspective on the best practices of one’s competitors, whether they were in New York, London, or Tokyo.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"Robert Solow", 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, longitudinal study, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, Plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, ubercab, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

Its performance compared to that of other hedge funds, especially quant funds, will help us understand where the true experts are in this domain, and how powerful the crowd can be. At least one stalwart of the investment community’s core believes enough in Quantopian to trust it with his own money. In July of 2016, Steven Cohen, one of the best-known hedge fund managers of all time, announced that he was making a venture investment in Quantopian and also giving it $250 million from his family office to invest in its crowdsourced portfolio of quant algorithms. Matthew Granade, Cohen’s head of research and venture investment, said that “the scarce resource in quantitative investing is talent, [and] Quantopian has demonstrated an innovative approach to finding that talent.” We find Quantopian fascinating because it illustrates all three of the technology trends that are reshaping the business world.


pages: 433 words: 125,031

Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, creative destruction, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, Rubik’s Cube, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, We are the 99%, William Langewiesche

In either case, they skirt all the taxes they legally (and sometimes not so legally) can. They put their assets in a variety of exotic structures in a variety of exotic locales—Uruguay, Liechtenstein, the South Pacific island of Niué. The problem becomes taking care of your stuff. With a hundred million dollars, you might have bodyguards and assistants and a permanent staff to care for your homes. With a billion, you need someone like Santiago. With a few billion, you need a family office of your own, a whole company to manage your assets and affairs. Abilio Diniz’s occupies multiple floors of an office building in São Paulo. Sometimes not even that’s enough. I met a former management consultant named Natasha Pearl who tends to the trickier aspects of life for the ultrarich. She knows what numbers to call if you want to buy a racehorse or sell a diamond necklace. She knows discreet psychiatrists for troubled heirs and heiresses.


pages: 437 words: 132,041

Alex's Adventures in Numberland by Alex Bellos

Andrew Wiles, Antoine Gombaud: Chevalier de Méré, beat the dealer, Black Swan, Black-Scholes formula, Claude Shannon: information theory, computer age, Daniel Kahneman / Amos Tversky, Edward Thorp, family office, forensic accounting, game design, Georg Cantor, Henri Poincaré, Isaac Newton, Johannes Kepler, lateral thinking, Myron Scholes, pattern recognition, Paul Erdős, Pierre-Simon Laplace, probability theory / Blaise Pascal / Pierre de Fermat, random walk, Richard Feynman, Rubik’s Cube, SETI@home, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, traveling salesman

His follow-up book, Beat the Market, helped transform securities markets. In the early 1970s he, together with a business partner, started the first ‘market neutral’ derivatives hedge fund, meaning that it avoided any market risk. Since then, Thorp has developed more and more mathematically sophisticated financial products, which has made him extremely rich (for a maths professor, anyway). Although he used to run a well-known hedge fund, he now runs a family office in which he invests only his own money. I met Thorp in September 2008. We were sitting in his office in a high-rise tower in Newport Beach, which looks out over the Pacific Ocean. It was a delicious California day with a pristine blue sky. Thorp is scholarly without being earnest, careful and considered, but also sharp and playful. Just one week earlier, the bank Lehman Brothers had filed for bankruptcy.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, bank run, banking crisis, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, break the buck, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, quantitative easing, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, wikimedia commons, yield curve

Globalization, Big Bang and financial deregulation in the US changed all that. By 2007, the City was no longer the self-contained Square Mile around the Bank of England but a dispersed community with global reach. Eighty-seven thousand people worked in the towers of Canary Wharf with its underground shopping malls, glitzy bars and crowded gyms. To the west in Mayfair, hedge funds, private equity funds and family offices went about their business behind discreet nameplates. The number of City jobs in London had more than trebled to 338,000 in a quarter of a century. If support functions were included, over a million people were employed in financial services in the UK and many more depended on them. Financial services accounted for 7 per cent of national output, making it the single most important industry in the UK – but its influence was even greater than that.


pages: 444 words: 127,259

Super Pumped: The Battle for Uber by Mike Isaac

"side hustle", activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, always be closing, Amazon Web Services, Andy Kessler, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Bay Area Rapid Transit, Burning Man, call centre, Chris Urmson, Chuck Templeton: OpenTable:, citizen journalism, Clayton Christensen, cloud computing, corporate governance, creative destruction, don't be evil, Donald Trump, Elon Musk, family office, gig economy, Google Glasses, Google X / Alphabet X, high net worth, Jeff Bezos, John Markoff, Kickstarter, Lyft, Marc Andreessen, Mark Zuckerberg, mass immigration, Menlo Park, Mitch Kapor, money market fund, moral hazard, move fast and break things, move fast and break things, Network effects, new economy, off grid, peer-to-peer, pets.com, Richard Florida, ride hailing / ride sharing, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, skunkworks, Snapchat, software as a service, software is eating the world, South China Sea, South of Market, San Francisco, sovereign wealth fund, special economic zone, Steve Jobs, TaskRabbit, the payments system, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, ubercab, union organizing, upwardly mobile, Y Combinator

They have to fend off hordes of eager founders seeking their favor. Even while relaxing at the bar in the Rosewood—the luxury hotel that has long acted as the social hub of tech money in Palo Alto—they’re likely to be interrupted by an awkward elevator pitch. A venture capitalist’s job is to cut through all the noise and find the startups that will deliver outsized returns for the pension funds, endowments, family offices, even other high-net-worth individuals who have invested their money as limited partners, or LPs, in the VC firm. The lifecycle of a VC fund is typically ten years, by the end of which these LPs expect returns of at least 20 to 30 percent on their initial investments. Venture capital is risky. Roughly one-third of VC investments will fail. But a heightened “risk profile” comes with the territory.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game

Before the age of globalisation, these functions used to be carried out, as in the Middle Ages, by trusted, unpaid close confidants of the rich family, but as the world’s financial markets opened up, ushering in an era of rapidly increasing complexity in financial affairs, the activity became more and more professionalised. Wealth managers construct and manage large, complex international structures involving banks, tax havens, trusts and foundations, wills, law and accounting, corporations, share and bond portfolios, insurance products, hedge funds, and more – putting them right at the heart of the machinery of global finance. Often working in teams, often operating in ‘family offices’ catering to a single family, they are the elite general dogsbodies of the super-rich. To make their clients feel comfortable they ideally come from the same social class, having imbibed the same manners and customs from childhood: down-at-heel aristocrats for the old money and sophisticated smoothies for the new. Good wealth managers keep their clients’ assets dancing freely between different legal systems, taking advantage of loopholes while avoiding getting snagged by rules and responsibilities, and staying permanently abreast of shifting legal and political tides in each country.


pages: 668 words: 159,523

Coffeeland: One Man's Dark Empire and the Making of Our Favorite Drug by Augustine Sedgewick

affirmative action, Alfred Russel Wallace, British Empire, business cycle, California gold rush, collective bargaining, European colonialism, family office, Fellow of the Royal Society, Food sovereignty, Frederick Winslow Taylor, Honoré de Balzac, imperial preference, Joan Didion, Johann Wolfgang von Goethe, land reform, land tenure, Louis Pasteur, mass immigration, Monroe Doctrine, Philip Mirowski, race to the bottom, refrigerator car, the scientific method, The Structural Transformation of the Public Sphere, trade route, wage slave, women in the workforce, working poor, zero-sum game

Their honeymoon coincided with the final stages of construction on the Panama Canal, cinching the region up toward the United States all the more tightly. “So far as the United States is concerned,” Putnam wrote, “the Canal practically means the rediscovery of Central America.” Like those of the original conquistadors, Putnam’s discoveries conformed to the image of what he had come looking for. The account he sketched up, a “souvenir of a delightful tropical trip,” was dedicated to his wife and published by the family office in 1913, a year before the canal opened.38 To Putnam, Central America was a fixer-upper: “a little-known land of glowing possibilities, unique problems, and grave responsibilities.”39 The possibilities, problems, and responsibilities were all equally the property of the United States: the golden glow of the first cast an urgent light on the second, suffusing his and similar travelogues with a deeply patronizing conception of the third.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business cycle, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost airline, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, MITM: man-in-the-middle, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

Epitomizing the extremes of inequality in America today, this one family enjoys wealth equal to all the assets of the entire bottom 40 percent of the U.S. population—120 million people. In Upper Richistan and Billionaireville, Frank wrote, the super-rich and ultra-rich often compete with each other in conspicuous consumption. Their primary residence costs an average of $16.9 million. Many of these families set up “family offices,” where their personal management staff is dedicated to running their households, paying bills, arranging travel, and handling day-to-day needs. In this group, butlers are back in fashion. According to Frank, super-rich families spend up to $2 million a year on staff, $107,000 for annual spa bills, and up to $182,000 each on watches and $319,000 for cars. For investments, they don’t buy mutual funds; they buy timber, land, oil rigs, and office towers.


pages: 553 words: 168,111

The Asylum: The Renegades Who Hijacked the World's Oil Market by Leah McGrath Goodman

anti-communist, Asian financial crisis, automated trading system, banking crisis, barriers to entry, Bernie Madoff, computerized trading, corporate governance, corporate raider, credit crunch, Credit Default Swap, East Village, energy security, Etonian, family office, Flash crash, global reserve currency, greed is good, High speed trading, light touch regulation, market fundamentalism, peak oil, Peter Thiel, pre–internet, price mechanism, profit motive, regulatory arbitrage, reserve currency, rolodex, Ronald Reagan, side project, Silicon Valley, upwardly mobile, zero-sum game

It’s like trying to put a Band-Aid on a severed head. The oil market is like a criminal: it’s always evolving, always changing. We have yet to have a president who will actually get up and tell everyone the truth, say to the American people, ‘We can’t control this bad boy anymore.’ If it’s true that you can’t have innovation without the Frankenstein, then Nymex is that Frankenstein.” D’Agostino went on to work for a number of family offices and hedge funds across Manhattan and abroad. The “Fuck ICE” Guy After receiving several million dollars from the CME merger, the executive who led Nymex’s failed push into London went from being a pit trader to a screen trader. He now works from home. “You know, after I left Nymex, I started walking my kids to school, but then I noticed that the other parents were avoiding me. I couldn’t figure out why.


pages: 559 words: 169,094

The Unwinding: An Inner History of the New America by George Packer

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, bank run, big-box store, citizen journalism, cleantech, collateralized debt obligation, collective bargaining, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, diversified portfolio, East Village, El Camino Real, Elon Musk, family office, financial independence, financial innovation, fixed income, Flash crash, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, income inequality, informal economy, Jane Jacobs, life extension, Long Term Capital Management, low skilled workers, Marc Andreessen, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Menlo Park, Neil Kinnock, new economy, New Journalism, obamacare, Occupy movement, oil shock, paypal mafia, peak oil, Peter Thiel, Ponzi scheme, Richard Florida, Robert Bork, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, side project, Silicon Valley, Silicon Valley startup, single-payer health, smart grid, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, urban planning, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, white picket fence, zero-sum game

Some of them grumbled that Thiel had brilliant ideas but couldn’t time trades or manage risk—he’d been predicting a crash in real estate for years, but when the moment came he was unable to take advantage. In mid-2010, with the bleeding unstanched, Clarium had to close its New York office and return to San Francisco. The moves were costly disruptions. By 2011, the fund’s assets were down to $350 million, two-thirds of it Thiel’s money, the entirety of his liquid net wealth. Clarium became a de facto family office. For the first time in his life, Thiel had failed at something he prized, publicly and spectacularly. He was humbled by it, and unlike at PayPal, where setbacks had triggered outbursts, he took losing well and kept an even keel with his staff. During the same period, his view of America began to darken. As he reconsidered the years since the seventies, years that had seemed so bright and hopeful, especially in Silicon Valley, even Facebook lost its glow.


pages: 641 words: 182,927

In Pursuit of Privilege: A History of New York City's Upper Class and the Making of a Metropolis by Clifton Hood

affirmative action, British Empire, coherent worldview, David Brooks, death of newspapers, deindustrialization, family office, Golden Gate Park, Google Earth, jitney, mass immigration, new economy, New Urbanism, P = NP, plutocrats, Plutocrats, Ray Oldenburg, ride hailing / ride sharing, Scientific racism, selection bias, Steven Levy, The Great Good Place, Thorstein Veblen, trade route, urban planning, We are the 99%, white flight

Their gifts have helped make New York City the spectacular metropolis it has become; take them away, and New York would be a more ordinary place.4 Besides their huge fortune and their commitment to civic missions that would justify their wealth and atone for past business ruthlessness and for notorious incidents like the Ludlow Massacre of 1914, their penchant for organization is also a legacy of the Rockefellers. Starting with the innovation of the Standard Oil Trust in 1883, the Rockefellers have been adept at using organizations to achieve their ends, from the family office in Room 5600 of the RCA Building that handled their investments, to foundations like the Rockefeller Foundation and the Rockefeller Brothers’ Fund that have directed their philanthropic endeavors, to auxiliaries like the Rockefeller Archive Center that generate knowledge about the family and its activities. They have also retained public relations consultants, lawyers, scientists, architects, and art historians who used their expertise to refine and perpetuate the mission of the family.


pages: 579 words: 183,063

Tribe of Mentors: Short Life Advice From the Best in the World by Timothy Ferriss

23andMe, A Pattern Language, agricultural Revolution, Airbnb, Albert Einstein, Bayesian statistics, bitcoin, Black Swan, blockchain, Brownian motion, Buckminster Fuller, Clayton Christensen, cloud computing, cognitive dissonance, Colonization of Mars, corporate social responsibility, cryptocurrency, David Heinemeier Hansson, dematerialisation, don't be evil, double helix, effective altruism, Elon Musk, Ethereum, ethereum blockchain, family office, fear of failure, Gary Taubes, Geoffrey West, Santa Fe Institute, Google Hangouts, Gödel, Escher, Bach, haute couture, helicopter parent, high net worth, In Cold Blood by Truman Capote, income inequality, index fund, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Lao Tzu, Law of Accelerating Returns, Lyft, Mahatma Gandhi, Marc Andreessen, Marshall McLuhan, Mikhail Gorbachev, minimum viable product, move fast and break things, move fast and break things, Naomi Klein, non-fiction novel, Peter Thiel, profit motive, Ralph Waldo Emerson, Ray Kurzweil, Saturday Night Live, side project, Silicon Valley, Skype, smart cities, smart contracts, Snapchat, Steve Jobs, Steven Pinker, Stewart Brand, TaskRabbit, Tesla Model S, too big to fail, Turing machine, uber lyft, web application, Whole Earth Catalog, Y Combinator

After selling his interest in The Princeton Review, Adam turned his attention in the early ’90s to the then-emerging field of artificial intelligence, developing a program that could analyze text and provide human-like commentary. He was later invited to join a well-known quant fund to develop statistical trading models, and since, he has established himself as an independent global macro advisor to the chief investment officers of a select group of the world’s most successful hedge funds and ultra-high-net-worth family offices. What is the book (or books) you’ve given most as a gift, and why? Or what are one to three books that have greatly influenced your life? Our unconscious mind is working all the time, processing orders of magnitude more information, and with astoundingly greater facility, ​than is our conscious mind. Of course our entire education system, and indeed much of Western philosophy—is devoted to improving our conscious thinking and capacities rather than our unconscious ones.


pages: 613 words: 200,826

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles by Michael Gross

Albert Einstein, Ayatollah Khomeini, bank run, Bernie Madoff, California gold rush, clean water, corporate raider, Donald Trump, estate planning, family office, financial independence, Irwin Jacobs, Joan Didion, Maui Hawaii, McMansion, mortgage debt, Norman Mailer, offshore financial centre, oil rush, passive investing, pension reform, Ponzi scheme, Right to Buy, Robert Bork, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Steve Wozniak, The Predators' Ball, transcontinental railway, yellow journalism

They alleged she asked Mullen to put together a gift list that totaled “someplace in the range of $10 million,” and that in a meeting with one of her lawyers after the new documents were drawn up, she upped her gifts to a maid and secretary and deleted Stockmar because “she had already done enough for Diane and … they had not been in close contact with each other for some time.” The response then recounted the sad end of Dolly’s life in great detail, her January 1987 visit to a glaucoma specialist that left her suicidal, her last visit to the family office that February, the hiring of round-the-clock nurses shortly afterwards, a March call to her lawyers from one of the chauffeurs saying Dolly wanted to revise her will again, and the way “Respondent Logan was asked to help guide Dolly’s hand to the line on which she should sign (since she could not see well enough to find the line).” One last curious feature of the executors’ response to Stockmar was their answer when asked whether Dolly believed Diane to be her daughter.


pages: 735 words: 214,791

IBM and the Holocaust by Edwin Black

card file, computer age, family office, ghettoisation, IBM and the Holocaust, index card, profit motive, Transnistria

Challenges to one’s Aryan background were commonplace. Whether driven by a sense of national duty or ordinary fear, everyone was forced to confront their racial make-up. At the apex of racial grading was a bureaucratic entity attached to the Interior Ministry. This section began its existence before 1933 as the Nazi Information Office. Ultimately, after numerous name changes, it became known as the Reichssippenamt, or Reich Family Office, endowed with the final authority to decide who was Jewish or Aryan.71 Lists were distributed, exchanged, and updated continously, often in a haphazard fashion. To cope with the growing bureaucratic fascination with punch card records, senior Interior Ministry officials reviewed one fanciful proposal for a twenty-five-floor circular tower of data to centralize all personal information. The proposal was rejected because it would take years to build and stock.


pages: 736 words: 210,277

1948: A History of the First Arab-Israeli War by Benny Morris

Albert Einstein, British Empire, family office, friendly fire, illegal immigration, mass immigration

More important, the Egyptians still held the Gaza Strip and the Faluja Pocket areas of Mandatory Palestine. They had established a continuous chain of fortified positions between Auja al-Hafir and Bir Asluj, just south of Beersheba, which effectively left the central and southern Negev under their thumb and Beersheba itself under potential threat. Israel, meanwhile, remained burdened by the crippling weight of mobilization: half its adult males were under arms, away from their families, offices, farms, and plants, and with no end in sight. The new state, ravaged by the war, needed its manpower and peace to pursue reconstruction and to absorb the masses of immigrants flooding its shores. Yoav had failed to resolve the strategic dilemma of "no war, no peace." David Ben-Gurion was still powerfully drawn to Judea and Samaria by historical-ideological and strategic considerations,' but international diplo matic considerations dictated caution and restraint.


pages: 827 words: 239,762

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, barriers to entry, Bayesian statistics, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business cycle, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, disruptive innovation, Donald Trump, family office, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global pandemic, Gordon Gekko, hiring and firing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kickstarter, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, new economy, obamacare, oil shock, pattern recognition, performance metric, Peter Thiel, plutocrats, Plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sam Altman, Sand Hill Road, Saturday Night Live, shareholder value, Silicon Valley, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, survivorship bias, The Nature of the Firm, the scientific method, Thorstein Veblen, union organizing, urban renewal, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

The firm’s first fund was just $8 million; its eighth was $550 million.4 While that size constrained the ability of the funds to achieve the spectacularly high returns of smaller funds, it likewise opened venture capital to a wide variety of pension fund and other institutional investors. There is Peter Crisp (’60), hired by Laurance Rockefeller in 1960 to help with the Rockefeller family’s informal venture investments. Crisp played a pivotal role in the 1969 creation of Venrock, which transformed an informal angel group into one of the first professional family-office venture operations. Along with the Phippses and the Whitneys, Venrock set the bar for professionalized venture investing. Over the thirty years through 1999, Venrock, which began with just $7.5 million in capital, invested in 272 companies, of which 152 were winners (with gains of $1.9 billion), 71 were losers (losses of $93 million), and 72 still in play. Crisp was helped in the effort by HBS grads Red McCourtney (’66), Anthony Sun (’79), and Ray Rothrock (’88).5 There is John Castle (’65), chairman and CEO of DLJ Capital, who oversaw the launch of DLJ’s Sprout Fund in 1969 with $11.5 million in funding—the first venture fund directly sponsored and controlled by an investment bank.


pages: 790 words: 253,035

Powerhouse: The Untold Story of Hollywood's Creative Artists Agency by James Andrew Miller

Affordable Care Act / Obamacare, Airbnb, Albert Einstein, Bonfire of the Vanities, business process, collective bargaining, corporate governance, Donald Trump, family office, interchangeable parts, Joan Didion, Kickstarter, obamacare, out of africa, rolodex, Ronald Reagan, Saturday Night Live, Silicon Valley, Skype, stem cell, Steve Jobs, traveling salesman, union organizing

I’m not so much talking about what the film is about, because I don’t believe I’m moral artistically all the time, but more in terms of the code I use when I either accept or pass on roles. In 2008, CAA’s Rick Hess was an executive in charge of the agency’s Film Finance Group, increasingly finding himself, often in tandem with partner David O’Connor, involved in multifaceted transactions from private equity, hedge funds, and wealthy family offices to fund slates on movies. For example, CAA had put together for producer Jerry Bruckheimer a financing fund that was north of $300 million from Barclays, and even though it was discontinued after the crash of 2008, Bruckheimer was still able to walk away with roughly $20 million for development. Add to that a massive deal for Chris Meledandri to start a subsidiary group at Universal and it became clear that there was a full-service investment bank advisory group to be formed.


pages: 1,066 words: 273,703

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, break the buck, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, paradox of thrift, Peter Thiel, Ponzi scheme, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, structural adjustment programs, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

Bypassing the bankrupt savings and loans and the struggling commercial banks, cash deposits flowed into huge pools of professionally managed cash looking for good yields on Wall Street. Nor were the MMFs the only ones. Corporations began to manage their cash pools more professionally. Ultrarich individuals who became more and more numerous from the 1970s onward had billions of dollars that were managed by funds and family offices. By the end of the 1990s perhaps as much as a trillion dollars had accumulated in these institutional cash pools, looking for highly liquid, interest-yielding investment opportunities that were absolutely, or close to absolutely, safe.30 Lending against security, or buying the commercial paper of well-known investment banks, was precisely the kind of safe short-term asset that the managers of the cash pools wanted.


pages: 1,157 words: 379,558

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris by Richard Kluger

air freight, Albert Einstein, California gold rush, cognitive dissonance, corporate raider, desegregation, double entry bookkeeping, family office, feminist movement, full employment, ghettoisation, Indoor air pollution, medical malpractice, Mikhail Gorbachev, plutocrats, Plutocrats, publication bias, Ralph Nader, Ralph Waldo Emerson, RAND corporation, rent-seeking, risk tolerance, Ronald Reagan, selection bias, The Chicago School, the scientific method, Torches of Freedom, trade route, transaction costs, traveling salesman, union organizing, upwardly mobile, urban planning, urban renewal, War on Poverty

Indeed, his father had turned from Judaism to the Ethical Culture Society, and Joe Junior was very much the assimilationist, at ease in almost any social sphere. Indoctrinated early in the tobacco business and as a youngster attending leaf auctions abroad with his father, Joe Junior worked for a while after college in the tobacco fields of Wisconsin and on Cuban plantations before sharing a rolltop desk with his father in the family office. Over time, he would master the horticulture of cigar tobacco to the point where he could tell by the look, feel, taste, and smell of a leaf just where it grew, the nature of the soil that had nourished it, the density of the yield per acre, and what kind of fertilizer had been applied to it. He also moved the family beyond the business of buying and reselling Sumatran leaf for wrapping cigars and Cuban leaf for filling them by pushing his father in 1910 into buying land in the Connecticut River Valley to raise their own “shade” tobacco, grown under a veil of protective cheesecloth, for sale to cigar makers.


pages: 1,266 words: 344,635

Great North Road by Peter F. Hamilton

airport security, business process, corporate governance, data acquisition, dematerialisation, family office, illegal immigration, invention of the telescope, inventory management, plutocrats, Plutocrats, stem cell, the map is not the territory, undersea cable

“On a larger contract, which is what yours would be to the area office where you’re based, the owner has a much greater leverage. Believe me, if we can swing the deal we don’t want to let you go. Size always gives you the strength to negotiate a discount, and the most beneficial terms.” “Yes.” Saul wanted to see how Noah would counter that excellent argument. But for some reason Noah seemed to have given up in disgust. Then it was details. Exactly the kind of thing that had sent Saul running from the family office. Not today. Today he contributed everything he could, every question he’d heard his father and brother ask their clients. Service arrangements? Spare parts, licensed microfacture or import with discount? Maintenance—would you consider a local start-up partnership with Massachusetts Agrimech, giving both sides a larger presence? Tax advantages? Haulage to site cost waver? Ownership holding company registration?