INVESTING LIKE A TIGER: WHERE UBER-RICH ALLOCATE THEIR ASSETS?
Sunday, Dec. 23, 2012Investing like a TIGER: Where uber-rich allocate their assets?By Dian VujovichManaging money takes concentration and effort, particularly for the wealthy. Their focus typically moves topreserving, rather than accumulating – challenging in any market conditions.For the uber-wealthy, that’s where TIGER 21 – a peer-to-peer members-only group – can come in.The acronym stands for The Investment Group for Enhanced Results for the 21st Century. Michael Sonnenfeldtcame up with the moniker in 1999 when he founded the club a year after making bundles from the sale ofEmmes, his New York-based real estate company.There is a respected confidentiality among the group’s nearly 200 members. Each has to have a minimum of$10 million in assets and pony up $30,000 for dues each year.Becoming a TIGER 21 member carries benefits beyond what other peer-to-peer organizations such as YPO orVistage offer.”Other peer-to-peer groups are 100 percent focused on business,” says Charles Garcia, chairman and facilitatorof the TIGER 21 group that meets monthly in Miami. “We are focused on investments, the people that have acertain amount of wealth and the issues surrounding them, their families and their wealth. I don’t know of anyother group like that.”What that means is that during a day-long TIGER 21 meeting – in the United States, groups meet each monthin Dallas, Los Angeles, Miami, New York City, San Diego, San Francisco, and Washington, D.C., and in Canada,groups meet in Calgary, Montreal, Toronto and Vancouver – the subject matter will likely include everything frominvestment opportunity presentations from outside sources, to conversations about a member’s personal and/orhealth concern, to a group review and analysis of a member’s investment portfolio. This is aptly referred to as aPortfolio Defense.Divvy up TIGER 21 member dollarsOne reason Sonnenfeldt created TIGER 21 was reported to be that, after making his fortune, he realized helacked the skills and knowledge to create a diversified portfolio to manage and preserve his wealth.That’s not an uncommon problem for those who have spent most of their time building a business they eventually sell formega-millions.”Real assets, including real estate, timber, private and public equity, hedge funds solutions, fixed-incomeopportunities all can have non-correlative market characteristics,” says Kurt Sylvia, senior vice president inPrivate Wealth Management at UBS Financial Services in Palm Beach.Those who’ve acquired significant wealth, either on their own or through inheritance, typically need guidance,Sylvia says. “They also need access to intellectual capital and management if they want to maintain theirfinancial success.”While TIGER 21 members also work with professional financial advisers on their own, some of the benefits ofmembership are the sharing of investment knowledge and the presentation of investment opportunities targetedto the intellectual curiosity and needs of each group.”If the group decides that they’d like to learn more about investing opportunities say in China, for example, whichour group did have an interest in, TIGER 21 representatives will seek out the best China sources and invite themto address the group, ” explains Garcia. After a presentations it’s up to each member to decide whether or notthey’d like to add – in this case a China play – to their own portfolios.”In our case, there was a difference of opinion whether China was a good or bad investment,” says Garcia, wholives in Boca Raton. “One of the presenters was from a fund that was long China, the other from a fund that wasshort China. Each had diametrically different stories so we were left to figure out what was the real truth.And from there members made their own decisions. “As it turned out, one member believed the short story, threeothers the long one.TIGER 21’s member asset allocation profileEven though TIGER 21 meetings are closed, how members collectively divvy their billions among asset classesis public knowledge.In the two accompany charts, one shows where funds were allocated during the third quarter of 2012, and theother shows the quarterly asset allocations over five years. These snapshots reflect a composite of how thecombined 200 members invest; neither graph represents how any individual member invests.Even so, it’s interesting to see which asset classes matter the most to TIGER members.They don’t seem hot on are currieries and commodities, with little allocated to either over the short term or thelonger term. And the interest in hedge-fund investing has waned.On the other hand, the asset allocation classes garnering most of theTIGER money have been in real estate, and private and public equities.The third-quarter TIGER 21 member allocation pie chart shows more than two-thirds (64 percent) of assets fellinto those three buckets: real estate (23 percent), public equities (23 percent) and private equity (18 percent).It’s also clear from the charts that fixed-income is not where this group collectively sees investing opportunities.And why ought they? Most made their money in business, and it’s business they know best.Garcia has seen that shift into private equity recently and thinks the reason could be that members “may not begood individual stock pickers, but they really know how to invest and make money in business.”The full asset allocation profile “moves a little bit like a glacier,” says TIGER 21 president Jonathan Kempner.”That’s because the snapshots come in small quarterly doses.”As far as cash holdings, the pie chart shows allocation to cash and cash equivalents last quarter was 13 percent.But the bar chart shows that during the first quarter of 2011 that allocation was 17 percent – its highest level infive years.Looking in from the outsideSo what does the asset allocation mean to non-TIGER 21 members? Maybe that change in cash holdings, forinstance, means TIGERs are loosening their belts and seeing more investing opportunities than the averageinvestor. Then again, maybe not. It is the holidays, and perhaps this group has whopper gifts to buy. Or perhapsthey have cash to move around given the likelihood of the coming changes in tax laws.Whatever is behind their asset allocation decisions, each TIGER 21 member has his or her own reasons for theinvestment portfoliot they’ave constructed.And, money isn’t the most important thing in their lives. “What trumps money to our members,” says Kempner, “isfamily, health and intellectual stimulation.”