If I was a billionaire, I would be very very nervous just dumping my billions in a S&P 500 ETF. At that level of wealth, you really ought to have a portfolio manager who can slice and dice your exposure in advantageous ways.
I don't think active management makes sense for the majority of folks, but billionaires are exactly the kind of people that it does make sense for. With a billion or two you can probably get yourself into some pretty good closed-end funds (if you're savvy about it) that will probably deliver better risk adjusted returns than vanilla passive.
Personally, if I had the money, I would go with 2 Sigma or AQR. Both of their past returns streams are stellar and uncorrelated with the markets.
You also need to consider overlap of investments with the main source of income. For Bezos, it makes no sense to just buy a NASDAQ ETF since most of his wealth is already highly correlated with it. Either he hedges this effect out or skews investments otherwise. In either case he'll need knowledgeable people that can plan the effects on both financial and tax side.
That's also a likely reason why family office holdings often look very odd as they often only provide a hedge in case the main source of income dries up. And therefore, they cannot have any connection with it. Pure performance on a standalone basis is often only second priority.
> I would be very very nervous just dumping my billions in a S&P 500 ETF. At that level of wealth, you really ought to have a portfolio manager who can slice and dice your exposure in advantageous ways.
Why? A couple of billions should still be a tiny drop if compared to the market cap of S&P 500. What do those active portfolio managers provide to you?
80% of companies in the S&P500 over time produce zero return. 20% of companies account for ALL of the returns. In the past these would've been driven by massive growth stocks like Amazon going 1000x over a couple of decades. Now, the main reason to IPO a tech stock seems to be because the company has reached its growth potential and you want to flick it off to derisk early investors, and often it plummets as reality sets in. Meanwhile, high growth stocks are captured in pre-IPO markets and the gains are all accrued to private investors.
I think the S&P500 is an entirely different beast to what it was 20 or even 10 years ago as a result of this.
If you were a family office your goal would be to get exposure to pre-IPO growth stage stuff as well as the public market.
You don’t consider 100% exposure to purely US equities a problem? It’s a huge risk, especially in this market.
With a couple billion you can get yourself some nice deals in a bunch of different asset classes. Also with that kind of money you can put a chunk of your money in illiquid investments that potentially could provide some great returns.
I don't think active management makes sense for the majority of folks, but billionaires are exactly the kind of people that it does make sense for. With a billion or two you can probably get yourself into some pretty good closed-end funds (if you're savvy about it) that will probably deliver better risk adjusted returns than vanilla passive.
Personally, if I had the money, I would go with 2 Sigma or AQR. Both of their past returns streams are stellar and uncorrelated with the markets.