Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

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teelainen
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Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by teelainen » Thu Jul 11, 2019 9:49 am

Based on this model asset allocation of the ultra-wealthy, it appears that they invest very differently from average investors.

26% - Real Estate
25% - Private Equity
22% - Public Equities
12% - Cash
9% - Fixed Income
5% - Hedge Funds
1% - Miscellaneous
0% - Currencies & Commodities

Image

Questions:

1. Private Equity - If we want to get exposure to private equity, I assume there is no way accomplish this with index funds right? But is there anything else we can buy in the real world that will give us diversified exposure to private equity?

2. Hedge Funds - If we want to get exposure to hedge funds, is there an index fund that tracks this sector? If not, what is the closest thing that average investors can buy in the real world that will give them exposure to hedge funds?

3. Real Estate - If we want to get exposure to real estate, I assume we can just buy VNQ right?

Thanks.

jdilla1107
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by jdilla1107 » Thu Jul 11, 2019 9:58 am

Are you sure "real estate" doesn't include the house(s) they live in?
Are you sure "private equity" doesn't include a business they own or are a partner of?

There is a big difference depending on what these mean.

I am wealthy and think investing as a LP in a PE fund is not a good idea. The fees are laughably high. However, I have a direct ownership stake in several private businesses.

I also would highly caution against setting your asset allocation based on a brief CNBC segment. People who are ultra wealthy can afford to have things in which are not very good investments. (private islands, 10+ private houses)
Last edited by jdilla1107 on Thu Jul 11, 2019 10:04 am, edited 3 times in total.

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David Jay
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by David Jay » Thu Jul 11, 2019 10:01 am

Why would you want to copy a portfolio of some narrow group of ultra-wealthy people that you saw on CNBC? Really, why?

Do you know who the “Tiger 21” are?
Do you receive the cash flow that these people receive each year?
Do you face the same tax issues that they face?
Do you have the same generational estate issues that they have?
Do you have the same ability to absorb risk that they have?
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Sconie » Thu Jul 11, 2019 10:19 am

I try not to watch CNBC, Bloomberg or Fox Business----and when I do (inadvertently) have it on, I do my best to not pay any attention to it. At the very best, they are nothing more than "business entertainment."
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Whakamole » Thu Jul 11, 2019 10:23 am

I don't see why I'd need the asset allocation of the ultra-wealthy. I'm not ultra-wealthy. Investing like them won't necessarily make me ultra-wealthy.

I suspect the numbers, since it's an average, doesn't take into account that there's a massive difference between someone who has their wealth mostly in real estate, vs. mostly in private equity, vs. mostly in a publicly traded company that they all but control.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by drk » Thu Jul 11, 2019 10:31 am

I don't understand your goal. That's not how they became ultra-wealthy.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by TomatoTomahto » Thu Jul 11, 2019 10:34 am

I am “pretty darned comfortable” but not wealthy or ultra wealthy. Why would I want to invest like the ultra wealthy? Nobody claims that’s how they became ultra wealthy.

It’s a bit like saying that the world’s best violinists play Stradivarius violins, so if I want to be a better violin player, I should buy a Stradivarius.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by sunnywindy » Thu Jul 11, 2019 10:35 am

And what kind of return do they get? I'd bet you a simple 60% stocks/40% bonds return is far higher (and with less risk).
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by CurlyDave » Thu Jul 11, 2019 10:38 am

If the article had been titled: Asset Allocation of the Ultra-Lucky would you still want to emulate it?

Some of the ultra-wealthy are more interested in a defensive AA -- keep what we have, don't take chances. And they have a much longer time duration to consider than most of us.

Last point: Anyone who is ultra-wealthy is not going to be giving information to the media. This is the AA of the wannabes.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by GCD » Thu Jul 11, 2019 10:41 am

jdilla1107 wrote:
Thu Jul 11, 2019 9:58 am
I also would highly caution against setting your asset allocation based on a brief CNBC segment.
Yeah, regardless of what the ultra-wealthy are doing and whether this is applicable to you, there is a lot of nuance lost in a brief synopsis. Just yesterday I saw some quote of Mark Cuban (I think it was a blurb on Marketwatch) where he said "you are an idiot if you invest in the stock market." I thought that in itself was a remarkably idiotic comment coming from a reasonably financially competent guy, so I spent some time tracking down the interview and what he actually said. What he said was something a little different and it was in the context of don't invest in the stock market through a financial advisor who charges you high fees. He did use the word "idiot" regarding paying high fees. So one should be leery of what gets thrown around in these quick hit fluff stories.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Nowizard » Thu Jul 11, 2019 10:45 am

The ultra-wealthy have access to investment vehicles that are not available to others, and that is both a positive and negative. Some are more or less required to "invest" in certain things because of relationships with others with wealth, some like the idea of having things others don't, including hedge fund access, for example. There are many ultra-wealthy people who have made very poor investment decisions and many who have made excellent ones. They are not immune to downfalls, just less affected by losses. As others have pointed out, investing this way is not the way to become ultra-wealthy.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by goodenyou » Thu Jul 11, 2019 11:03 am

Don’t be tricked into believing that you are part of some special club because you invest like the ultra wealthy. They have a lot more staying power than you do, and fluctuations in their wealth usually doesn’t wipe them out.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Random Walker » Thu Jul 11, 2019 11:09 am

Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by marcopolo » Thu Jul 11, 2019 11:16 am

Random Walker wrote:
Thu Jul 11, 2019 11:09 am
Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

Dave
Odd, in another thread discussing how pension funds and institutions were not getting any benefits from factor investing, Larry (your guru) said they were fools. So, why should we follow their lead?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by vineviz » Thu Jul 11, 2019 11:25 am

drk wrote:
Thu Jul 11, 2019 10:31 am
I don't understand your goal. That's not how they became ultra-wealthy.
+1

This is not a portfolio that will turn an average investor into an ultra-wealthy one. If anything, it would probably have the opposite effect.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by bsteiner » Thu Jul 11, 2019 11:28 am

David Jay wrote:
Thu Jul 11, 2019 10:01 am
...
Do you know who the “Tiger 21” are?
...
Yes, I know several of their members.

You don't have to be ultra-wealthy to join. Their website says you only need $10 million of investable assets: https://tiger21.com/membership/becoming-member. However, since their dues are $30,000 a year, that would be a much smaller percentage of an ultra-wealthy person's assets than it would be for someone only worth $10 million.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Random Walker » Thu Jul 11, 2019 11:29 am

marcopolo wrote:
Thu Jul 11, 2019 11:16 am
Random Walker wrote:
Thu Jul 11, 2019 11:09 am
Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

Dave
Odd, in another thread discussing how pension funds and institutions were not getting any benefits from factor investing, Larry (your guru) said they were fools. So, why should we follow their lead?
Not sure I would say guru. I think that connotes blind faith. But I do think everything Larry says about investing makes a lot of sense. Not sure where Larry referred to pensions as fools; I’d like to read the thread and get some context. It’s actually from one of his books that I learned about pensions and institutions, the smart money, moving strongly towards passive.

Dave

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by marcopolo » Thu Jul 11, 2019 11:40 am

Random Walker wrote:
Thu Jul 11, 2019 11:29 am
marcopolo wrote:
Thu Jul 11, 2019 11:16 am
Random Walker wrote:
Thu Jul 11, 2019 11:09 am
Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

Dave
Odd, in another thread discussing how pension funds and institutions were not getting any benefits from factor investing, Larry (your guru) said they were fools. So, why should we follow their lead?
Not sure I would say guru. I think that connotes blind faith. But I do think everything Larry says about investing makes a lot of sense. Not sure where Larry referred to pensions as fools; I’d like to read the thread and get some context. It’s actually from one of his books that I learned about pensions and institutions, the smart money, moving strongly towards passive.

Dave
It is the second post in the long thread about why factor investing isn't working.

I questioned him about it, and he went on to defend his position (about them being fools) by pointing out the stupid things they do in several subsequent posts. So, you may want to update your position on them being "smart money". Larry does not seem to think so.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Ben Mathew » Thu Jul 11, 2019 11:43 am

The wealthy are not necessarily astute investors. There is no need to copy them.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Random Walker » Thu Jul 11, 2019 11:54 am

marcopolo wrote:
Thu Jul 11, 2019 11:40 am
Random Walker wrote:
Thu Jul 11, 2019 11:29 am
marcopolo wrote:
Thu Jul 11, 2019 11:16 am
Random Walker wrote:
Thu Jul 11, 2019 11:09 am
Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

Dave
Odd, in another thread discussing how pension funds and institutions were not getting any benefits from factor investing, Larry (your guru) said they were fools. So, why should we follow their lead?
Not sure I would say guru. I think that connotes blind faith. But I do think everything Larry says about investing makes a lot of sense. Not sure where Larry referred to pensions as fools; I’d like to read the thread and get some context. It’s actually from one of his books that I learned about pensions and institutions, the smart money, moving strongly towards passive.

Dave
It is the second post in the long thread about why factor investing isn't working.

I questioned him about it, and he went on to defend his position (about them being fools) by pointing out the stupid things they do in several subsequent posts. So, you may want to update your position on them being "smart money". Larry does not seem to think so.
I’ll stick with what I said. There is a trend towards passive for the smartest money. Perhaps some are faster on the uptake than others. Active funds seeking or claiming a certain style or factor tilt are very different than passive funds; no market timing or individual security selection.

Dave

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by FelixTheCat » Thu Jul 11, 2019 12:01 pm

Richest investor I know suggests you invest your money in 1) S&P 500 and 2) Short term government bonds. Guess who?
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by SantaClaraSurfer » Thu Jul 11, 2019 12:23 pm

Doesn't anyone invested in a total market index fund have more than a little exposure to real estate / venture capital investments / pe already?

And that's not counting the other ways folks might be participating (pension funds, annuities, life insurance, etc.).

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by whodidntante » Thu Jul 11, 2019 12:29 pm

For all the noise about Warren Buffett's stock picks, that is not the major component of Berkshire Hathaway's investments. Berkshire Hathaway owns several small businesses and on terms that are not available to you even if you are wealthy. I guess owning that is a reasonable proxy for PE, at a tiny fraction of the cost of a real PE fund.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by unclescrooge » Thu Jul 11, 2019 12:36 pm

teelainen wrote:
Thu Jul 11, 2019 9:49 am
Based on this model asset allocation of the ultra-wealthy, it appears that they invest very differently from average investors.

26% - Real Estate
25% - Private Equity
22% - Public Equities
12% - Cash
9% - Fixed Income
5% - Hedge Funds
1% - Miscellaneous
0% - Currencies & Commodities

Image

Questions:

1. Private Equity - If we want to get exposure to private equity, I assume there is no way accomplish this with index funds right? But is there anything else we can buy in the real world that will give us diversified exposure to private equity?

2. Hedge Funds - If we want to get exposure to hedge funds, is there an index fund that tracks this sector? If not, what is the closest thing that average investors can buy in the real world that will give them exposure to hedge funds?

3. Real Estate - If we want to get exposure to real estate, I assume we can just buy VNQ right?

Thanks.
I guarantee the ultra wealthy didn't get wealthy with that portfolio. They got that way though highly concentrated positions in businesses that did well.

Then they diversify to maintain their wealth.

You should not follow anything you see on CNBC, let alone this particular allocation.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by DaftInvestor » Thu Jul 11, 2019 12:37 pm

Note this is NOT all "Ultra wealthy" this is the Tiger 21 members.
Tiger 21 requires you to have $10M in assets (minimum) and also be willing to pay their fee of $30,000 annually in dues.
A lot of smarter folks don't part so easily with $30,000 even if they do have $10M or $100M in assets.
Why simulate this group?

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by David Jay » Thu Jul 11, 2019 12:45 pm

bsteiner wrote:
Thu Jul 11, 2019 11:28 am
David Jay wrote:
Thu Jul 11, 2019 10:01 am
...
Do you know who the “Tiger 21” are?
...
Yes, I know several of their members.

You don't have to be ultra-wealthy to join. Their website says you only need $10 million of investable assets: https://tiger21.com/membership/becoming-member. However, since their dues are $30,000 a year, that would be a much smaller percentage of an ultra-wealthy person's assets than it would be for someone only worth $10 million.
I read up on them, I wonder if the OP did. I stand by all of my questions to the OP when he is considering copying that portfolio for his own use.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by illumination » Thu Jul 11, 2019 12:52 pm

I'd be awfully skeptical of any survey presented, they usually have an agenda. It's human nature to think there's always some "secret" you're missing out on.

The ultra-wealthy usually got that way with a business they founded and most of their wealth is tied into that.

But I've known a decent amount of "really wealthy" (not Buffet level, but hundreds of millions in net worth) people and I'm highly skeptical their portfolio looks anything like this survey.

I don't think you want to emulate the "ultra-wealthy" they actually usually make a lot of big gambles because they can afford to. Some of it is also to just entertain themselves.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by GCD » Thu Jul 11, 2019 12:58 pm

From the Tiger21 website section on member testimonials:

"Belonging to TIGER 21 is like taking a graduate course in finance and investing. I have been a Member for almost six years. The most important lessons I’ve learned during this time have been about asset allocation and reducing risk through diversification..."

I take from this that not everyone who is fairly wealthy necessarily knows the best way for average folks to invest. That guy clearly got wealthy through a mechanism other than the 3 fund portfolio.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by David Jay » Thu Jul 11, 2019 1:04 pm

GCD wrote:
Thu Jul 11, 2019 12:58 pm
From the Tiger21 website section on member testimonials:

"Belonging to TIGER 21 is like taking a graduate course in finance and investing. I have been a Member for almost six years. The most important lessons I’ve learned during this time have been about asset allocation and reducing risk through diversification..."
This individual has already paid $150,000 for his course in Asset Allocation and Diversification.

Anyone know where I can get a course like this for free? :D
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by SuperSaver1975 » Thu Jul 11, 2019 1:05 pm

I'm glad I discovered this site and the concept of the 3 Fund Portfolio. My question to OP is, why bother with anything besides the 3 Fund Portfolio? Set it and forget it. Live life.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by MathWizard » Thu Jul 11, 2019 1:18 pm

FelixTheCat wrote:
Thu Jul 11, 2019 12:01 pm
Richest investor I know suggests you invest your money in 1) S&P 500 and 2) Short term government bonds. Guess who?
Both Buffet, and especially Munger say that the way to invest is to be able to analyze a business completely, like you were buying it,
and to buy intending to hold long-term. Basically, the want the income stream from the business, discounted for the time value of money
to be worth the investment, and to be better than alternatives, and to have a margin of safety.

Munger says that this necessarily means holding a very concentrated portfolio, since there are very few businesses out there that meet the
requirements, and you should only pick the best of those options.

This takes an analysis that most people (almost everyone) are not capable of.

If many people were, the prices would get too high.

Munger has also said that it is harder now than in the past, ( since there are fewer "bargains" out there that have not been picked over).

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by LFS1234 » Thu Jul 11, 2019 1:41 pm

illumination wrote:
Thu Jul 11, 2019 12:52 pm
I'd be awfully skeptical of any survey presented, they usually have an agenda.
The agenda here is clear enough. Every year, TIGER 21 compiles this survey and issues a press release, which gets widely reported in the popular press. This massive free publicity helps it to get its name out and to expand or at least replenish its membership. According to the organization's founder as quoted in a 2012 Barron's article, "TIGER 21 members stay on average four years, a median between those who bail within a year and those who see the peer group's long term benefits".

As pointed out upthread, the information contained in this survey is not particularly useful.

The group has been around for 20 years so there clearly is a (very small but sufficient) constituency for it. According to the Federal Reserve, there were over 1.3 million decamillionaire households in the US in 2016, and according to TIGER 21's web site its membership consists of 600+ persons. It would not surprise me in the slightest if there were a whole lot more decamillionaires posting on Bogleheads than there are in TIGER 21.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by goodenyou » Thu Jul 11, 2019 1:42 pm

Just buy into a hedge fund with wealthy individuals. They invest in all sorts of unconventional assets. See how that works out. It hasn't in the past many years.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by WhiteMaxima » Thu Jul 11, 2019 1:45 pm

You should copy Bezos and W Buffet to put 99% their asset in their company.


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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by michaeljmroger » Thu Jul 11, 2019 4:05 pm

I’m talking right now with a high-end family office focusing on ultra high net worth families as I’m considering the switch from Vanguard to them (see viewtopic.php?t=283322 for more context).

I’ve been studying their investment strategies and portfolio proposals and there are indeed some similarities with OP’s pic (specifically, hedge funds and private equities). That being said, there are also big differences, especially the substantial cash allocation (12% seems insane to me for a portfolio over $10M).

From my limited experience, these wealthy managers don’t necessarily beat the market, but they’re better at protecting your wealth from scary market drops.

I’m personally interested in this family office for the various services they offer, but I wouldn’t recommend their approach (or Tiger 21’s) over the 3-fund portfolio.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by teelainen » Thu Jul 11, 2019 6:25 pm

SuperSaver1975 wrote:
Thu Jul 11, 2019 1:05 pm
I'm glad I discovered this site and the concept of the 3 Fund Portfolio. My question to OP is, why bother with anything besides the 3 Fund Portfolio? Set it and forget it. Live life.
I love the 3 Fund Portfolio. But sometimes the asset allocation of the ultra-wealthy can withstand market crashes a little better. So it doesn't hurt to know what the ultra-wealthy hold in their portfolio, and perhaps even incorporate a tiny bit of their strategy into your own portfolio.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by David Jay » Thu Jul 11, 2019 6:41 pm

teelainen wrote:
Thu Jul 11, 2019 6:25 pm
But sometimes the asset allocation of the ultra-wealthy can withstand market crashes a little better.
Do you have any basis for this statement? I would propose that a single investment in a 40/60 3-fund or even LifeStrategy Conservative (40/60) would have less drawdown in a crash than the average portfolio of the TIGER21 participants (remember, this is an average of the different participants, not a specific portfolio recommendation).
teelainen wrote:
Thu Jul 11, 2019 6:25 pm
So it doesn't hurt to know what the ultra-wealthy hold in their portfolio, and perhaps even incorporate a tiny bit of their strategy into your own portfolio.
Actually, incorporating “a bit” from each of several places could hurt. May I recommend Rick Ferri, rather than TIGER21: viewtopic.php?f=10&t=285379
Last edited by David Jay on Thu Jul 11, 2019 6:46 pm, edited 1 time in total.
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by sometimesinvestor » Thu Jul 11, 2019 6:46 pm

I liked the suggestion that if you can't buy private equity and you probably should not.(I think its like the rule about IPOs : of you are offered the opportunity to buy into an IPO before it goes public you probably shouldn't as that suggests the "smart money was not enthusiastic) but as noted you could buy Berkshire.I am not sure the 3 fund portfolio + Berkshire will work out but a disaster seems unlikely .I myself I myself like the 5 fund portfolio (Total stock total bond,Total international + cash (so you have assets if the market goes down and what Cramer calls mad money like a stock or sector fund you think will work out. That latter investment may not work out but it will encourage paying some attention.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Artsdoctor » Thu Jul 11, 2019 7:25 pm

teelainen wrote:
Thu Jul 11, 2019 9:49 am
Based on this model asset allocation of the ultra-wealthy, it appears that they invest very differently from average investors.

26% - Real Estate
25% - Private Equity
22% - Public Equities
12% - Cash
9% - Fixed Income
5% - Hedge Funds
1% - Miscellaneous
0% - Currencies & Commodities

Image

Questions:

1. Private Equity - If we want to get exposure to private equity, I assume there is no way accomplish this with index funds right? But is there anything else we can buy in the real world that will give us diversified exposure to private equity?

2. Hedge Funds - If we want to get exposure to hedge funds, is there an index fund that tracks this sector? If not, what is the closest thing that average investors can buy in the real world that will give them exposure to hedge funds?

3. Real Estate - If we want to get exposure to real estate, I assume we can just buy VNQ right?

Thanks.
Well, if memory serves me correctly, Bernie Madoff only took money from the ultra wealthy "in his prime." He later took money from the little people as well. I don't necessarily want to plagiarize George Santayana but it's such a timeless phrase!

"Those who cannot remember the past are condemned to repeat it."

coachd50
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by coachd50 » Thu Jul 11, 2019 7:27 pm

drk wrote:
Thu Jul 11, 2019 10:31 am
I don't understand your goal. That's not how they became ultra-wealthy.
I was about to post the same thing before I saw this reply. Investing like the ultra wealthy is just as illogical as spending like the ultra wealthy.

DesertDiva
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by DesertDiva » Thu Jul 11, 2019 7:37 pm

I found the last bullet point interesting
  • 0% Currencies & Commodities

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joe8d
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by joe8d » Thu Jul 11, 2019 7:58 pm

Just buy The Total Mkt Indx and maybe 20% Total Int indx.
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mhadden1
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by mhadden1 » Thu Jul 11, 2019 8:04 pm

David Jay wrote:
Thu Jul 11, 2019 6:41 pm
teelainen wrote:
Thu Jul 11, 2019 6:25 pm
But sometimes the asset allocation of the ultra-wealthy can withstand market crashes a little better.
Do you have any basis for this statement?
This piqued my curiosity too. How does Tiger Beat Club withstand crashes? I would do it with T-bills.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by livesoft » Thu Jul 11, 2019 8:09 pm

teelainen wrote:
Thu Jul 11, 2019 6:25 pm
....
But sometimes the asset allocation of the ultra-wealthy can withstand market crashes a little better.
I haven't seen any evidence whatsoever to back up that statement. it just seems to be wishful thinking to me.
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Thesaints
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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by Thesaints » Thu Jul 11, 2019 8:13 pm

Is it that a portfolio for staying an ultra-wealthy, or for becoming one ?

PE and hedge funds only bring to the table the chance of higher returns, but they make you pay for it.

RE, I believe means they directly own properties (and have people managing them in their behalf). Shares of a REIT wouldn't bring any special advantage, not in returns, nor in stability.

Overall, what CNBC reports is nothing else than a 80/20 asset allocation. Not very different from any non-ultra-wealthy investor with a high risk tolerance

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by coachd50 » Thu Jul 11, 2019 8:37 pm

DaftInvestor wrote:
Thu Jul 11, 2019 12:37 pm
Note this is NOT all "Ultra wealthy" this is the Tiger 21 members.
Tiger 21 requires you to have $10M in assets (minimum) and also be willing to pay their fee of $30,000 annually in dues.
A lot of smarter folks don't part so easily with $30,000 even if they do have $10M or $100M in assets.
Why simulate this group?
I was just looking closely at the Visual on the screen and noticed that verbiage as well. If indeed this is the breakdown of "Tiger 21" members, one definitely needs to ask why should anyone consider emulating people who pay $30,000 a year to learn about "diversification".

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by nedsaid » Thu Jul 11, 2019 8:37 pm

Random Walker wrote:
Thu Jul 11, 2019 11:29 am
marcopolo wrote:
Thu Jul 11, 2019 11:16 am
Random Walker wrote:
Thu Jul 11, 2019 11:09 am
Look how the REALLY BIG MONEY invests, the pension funds and institutions. There is a big trend towards passive for them.

Dave
Odd, in another thread discussing how pension funds and institutions were not getting any benefits from factor investing, Larry (your guru) said they were fools. So, why should we follow their lead?
Not sure I would say guru. I think that connotes blind faith. But I do think everything Larry says about investing makes a lot of sense. Not sure where Larry referred to pensions as fools; I’d like to read the thread and get some context. It’s actually from one of his books that I learned about pensions and institutions, the smart money, moving strongly towards passive.

Dave
Nedsaid to the rescue, I found where Larry commented on the fools that run some pension plans. R1K is the Russell 1000 index (top 1,000 stocks in the 3,000 index by market cap, 90% of the market), R2K is the Russell 2000 index (Small Cap, smallest 2,000 stocks in the 3,000 index), R3K is the Russell 3000 index (Total Market, represents 98% of market cap).

I also see that Larry had addressed marcopolo's concerns in the other thread.
larryswedroe » Tue Jul 09, 2019 6:55 am

Marco
FWIW, I've met with many pension plans and they do many dumb things. Even seen one hold both R1k fund and R2k fund, which makes no sense as they are inefficient relative to a R3k fund which doesn't have the turnover. But they were "filling in the style boxes"
Larry
by marcopolo » Tue Jul 09, 2019 7:21 am

I don't doubt that at all. But, we are not talking about individual anecdotal mistakes here. The NTAM report the article references supposedly looked at 500 institutional portfolios. So, there seems to be a larger systemic problem with the implementation (i am not arguing the benefits in theory). Either most of them are "fools", hiring "fools", or there is a deeper problem in actually reaping the benefits that seem to be there in theory.

My real point is, if the vast majority of institutional investors, with their resources, can't get this right, how are us mere mortals supposed to reap the benefits, rather than just be stuck paying higher fees for uncompensated risks?
larryswedroe » Tue Jul 09, 2019 8:48 am

Marco, there are all kinds of dumb reasons pension plans fail, including that they feel like they have to do something to keep their jobs, like hiring and firing managers. The evidence is in fact that the managers they fire outperform the ones they hire. No wonder they get poor performance, they don't understand that 3-5 years is NOISE. And that even 10 with asset classes or factors is noise. There are simple human behaviors that explain why they do so poorly. To outperform them all one needs is to follow the findings from academic research and have discipline.
Larry
A fool and his money are good for business.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by firebirdparts » Thu Jul 11, 2019 9:27 pm

whodidntante wrote:
Thu Jul 11, 2019 12:29 pm
For all the noise about Warren Buffett's stock picks, that is not the major component of Berkshire Hathaway's investments. Berkshire Hathaway owns several small businesses and on terms that are not available to you even if you are wealthy. I guess owning that is a reasonable proxy for PE, at a tiny fraction of the cost of a real PE fund.
I agree with this. Why not get into PE with somebody you've heard of. Buffett is obviously good.

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Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

Post by bizkitgto » Thu Jul 11, 2019 9:33 pm

You could follow Buffett's advice and just invest in a Vanguard S&P 500 ($VOO) Index Fund, or you could just invest in Berkshire Hathaway ($BRK).
Keep it simple: 20% BND, 50% VTI and 30% VXUS

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