A TIGER WITH PINSTRIPES

B12 Globe Investor The Globe and Mail, Thursday, September 2, 2010MONEY MANAGEMENTA Tiger with pinstripesMichael Sonnenfeldt is a co-founder of an exclusive investment club for the wealthy that is coming to Canada next yearROB CARRICKPERSONAL FINANCErcarrick@globeandmail.com

You may never be a memberof an exclusive investmentclub for the wealthy calledTIGER 21, but you can still benefitfrom its expertise.The Investment Group for EnhancedResults in the 21st Centuryhas about 140 members inthe United States and expects tosign up more than 50 Canadiansby next year. Membership requirementsinclude at least $10-million (U.S.) in investable assetsand a willingness to pay$30,000 a year in membershipfees.The co-founder of the NewYork-based group is MichaelSonnenfeldt, a onetime real estateentrepreneur who in additionto running TIGER 21manages investments and runsa solar lighting company. Here,he discusses risk, portfolio buildingand other issues from theperspective of the wealthy investor.What is the most common investingobjective with yourmembers, preserving what theyalready have or growing it?Capital preservation. About 70per cent of our members areformer entrepreneurs whosold their business, and nowtheir primary economic activityis wealth preservation.They already made the choiceto get off the merry-go-round.Do your members all have investmentadvisers?No. Some do and some don’t.We have a very clear predispositionthat we’re agnostic onwhether somebody can bemore or less successful usingan investment adviser. Theskills that we teach are howdo you become the CEO ofyour investment company.Some CEOs are successful bybeing a hands-on manager,and some CEOs are successfulby delegating.What percentage of yourmembers have online brokerageaccounts to place their owntrades?

I would imagine that over halfhave online brokerage accounts.But a lot of our membershave an incredibly smallallocation that they “play”with, and that would be in anonline brokerage account.Fast facts on TIGER 21STANDS FORThe Investment Group forEnhanced Results in the 21stCentury.FOUNDEDIn 1999 by Michael Sonnenfeldt,a real estate entrepreneur, andRichard Lavin.PURPOSETo give high-net-worth individualsa forum to share informationand expertise on investing.ON THE AGENDAGuest speakers, presentations oninvestments by members and”portfolio defence,” wheremembers disclose theirinvestments and then receivefeedback from the group.MEMBERSHIP REQUIREMENT$10-million (U.S.) in investableassets, $30,000 in annual dues.Locations: Based in New York,with chapters in San Francisco,Los Angeles, San Diego, Miami,and Dallas, and plans to expandto Washington, D.C. and ChicagoMEMBERSHIP140 individuals with a combinednet worth of about $10-billion.COMING TO CANADAIn 2011.66 Source: www.tiger21.com/canadaWhat type of asset mix wouldyou typically see in member investmentportfolios?The most recent survey wedid shows our members areroughly 30 per cent in longonlyequities, a healthy percentageof which are international[long-only meansinvesting to benefit from priceappreciation, rather thanshort-selling to profit on pricedeclines]. They probably have10 to 12 per cent in private equity[companies that aren’tpublicly traded], 10 to 15 percent in bonds and 25 per centin real estate, about half ofwhich would be personal realestate. The other half wouldbe investment real estate.They would also have 8 to 12per cent in cash. Recently,we’ve noticed that there’s a 5-to 10-per-cent allocation togold, or more, with some ofour members. The balancewould be in hedge funds.Hedge funds would seem to the“it” product for yourdemographic. How popular arethey in reality?At the top of the market, let’ssay in mid or early 2008, ourmembers had between 10 and15 per cent in hedge funds. Bythe end of 2009, they appearedto have closer to 4 to 5per cent in hedge funds. Thatwas largest shift in any assetallocation that we’d ever seen,keeping mind that half of thatreduction was direct losses inthe hedge fund and the otherhalf was withdrawals and liquidations.How important are fees andcommissions to high-net-worthinvestors?Our members are payingmore and more attention tofees.Let’s talk about passive index investingversus activemanagement. Which way doyour people lean?There are a few purists at eitherend, but most memberswould be somewhere in themiddle based on their experiences.What kinds of investments doyour members own? Let’s startwith mutual funds.The people who have been inTiger a while, read a few ofthe books on our list andbeen to a few of our presentations,would think that ifthey’re not going to be astock-picker and own individualstocks, they would movemore toward index fundsrather than mutual funds. ButI would imagine one-third ofour members probably ownmutual funds.What about exchange-tradedfunds?ETFs are hot. What’s so excitingabout them is that there’ssuch a broad array of themthat you can pick any industry,commodity or theme andexpress it through some combinationof ETFs.What’s the mood of themembership right now aboutthe markets?Pretty bleak. It looks likethere’s an increasing possibilitythat we will be going intoa double-dip recession here inAmerica, and the situationisn’t much better in Europe.The overwhelming concern isthe deficit.Most Tiger members arepeople who got to be successfulbecause they had to makea budget every year and, ifthey spent more than they received,they were out of business.The notion that we’rerunning a trillion-and-a-halfdollardeficit is enough tochoke on every time youthink about it.66 Follow me on Facebook. I’m atRob Carrick ‚Äì Personal Finance