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June 9, 2014

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The New York Times Magazine OCTOBER 14, 2007 / SECTION GWhere Everyone Knows Your PortfolioAn investing club for the very wealthy gives members a chance to share financial advice as well as hugs. By Gary RivlinAt first Tommy Gallagher kept busy by answering phones for asuicide hot line. He taught personal finance and current events for alocal center for the elderly; he enrolled in continuing-ed classes atthe New School. “One day you’re on top,” Gallagher says. “The nextyou’re just the third guy on line at the Korean deli.” On 9/11, Gallagherwas still a reigning prince on Wall Street, the vice chairman ofCIBC World Markets, a major investment-banking firm. One monthlater, its offices (and business) having been damaged in the attackon the World Trade Center, he was fired. He was a millionaire manytimes over but also, at age 56, unemployed for the first time since hewas a teenager.”You lose everything when you lose your job,” Gallagher says.”Your whole social network disappears.” He read the newspaperfront to back. He began training for the New York City marathon. Yethe remained stuck largely in a dizzying, disoriented state of existentialconfusion.”I’d tell myself, O.K., I just ran eight miles,” he says. “And then I’dthink, O.K., now what do I do with the other 22 hours in the day?”Salvation came improbably in the form of a support group formultimillionaires called Tiger 21. Proving thathe had at least $10 million in the bank, theminimum needed to join, was easy enough: hehad that and then some, as well as the equityhe had built up in a place on the Upper EastSide and a second home in the Hamptons. Andhe passed muster with existing members, who,like Gallagher, the Brooklyn-born son of a tollboothoperator, tend to be self-made. So in thespring of 2002 Gallagher wrote his first checkfor $20,000 to cover the annual cost of belongingto a group that now operates 14 supportcircles for the superwealthy. “I was dying forsome place I could go and share my angst andfears with other people,” Gallagher says.That kind of sharing was not what Jake Jacobsonsought when he joined Tiger 21 in 2004.Like Gallagher, Jacobson, a former partner atthe consulting firm Bain & Company, had noproblem proving he was rich enough to belong.Nor was he troubled by the annual dues, whichhad risen to $25,000. These were businessexpenses, really, for someone who figured hewas joining a kind of Beardstown Ladies investmentclub – only its membership wasn’tgrandmothers from Middle America but entrepreneurswith tens of millions of dollars in thebank and a nose for deals.”I was willing to join in the hopes that atthe very least I would meet people who wouldbecome useful resources,” Jacobson says. “I was also hopingI would get a chance to look at some interesting moneymakingopportunities I might not otherwise have seen.”He would not be disappointed. But with time, Jacobson,who was feeling isolated working out of his home in Cambridge,Mass., has come to appreciate some of the other benefitsof sitting around Tiger 21’s conference table 11 times ayear for eight hours at a time under the guidance of a professionalfacilitator. “When one is successful,” he says, “mostpeople look at you and say, ‚ÄòYou don’t have problems.’ Inthe grand scheme of things, I suppose that might be true, butit’s unhelpful. Because I still have to live my life, and I haveproblems.”Certainly his fellow Tiger 21 members were there for himduring a regular monthly session earlier this year, when Jacobsonwas beating himself up over a few bad investments.A dozen or so men sat around the table on the top floor ofa handsome six-story brownstone steps from Fifth Avenueon Manhattan’s Upper East Side. One by one, they told himhow happy and centered he seemed and how well he wasdoing financially, even though he had lost a few hundredthousand dollars playing the stock market during the previous12 months.Then, after the last member of the circle had his say, one said,”We love you, man.”That caused Jacobson, a stocky man with a round face, to redden.He pursed his lips and, in a little boy’s voice, said, “I loveyou too, smoochy.”Tiger 21 was founded in 1999 by Michael Sonnenfeldt, ablue-eyed, Buddha-loving real estate developer from New Jersey.Then 43 years old, Sonnenfeldt had recently sold his realestate holding company for tens of millions of dollars. What washe supposed to do with all that money, especially in an overheatedstock market? He might know plenty about putting togetherthe financing on a big commercial development, but he didn’tfeel he had the skills or knowledge, he says, “to take this largecorpus of capital and redeploy it into a diverse portfolio.” Sonnenfeldtknew half a dozen men sitting on new-made fortunes.When all of them expressed an interest in meeting regularly, Tiger21 was born.Sonnenfeldt’s initial goals for the group are captured by itsname, an acronym for the Investment Group for Enhanced Resultsin the 21st Century, and also by its raison d’√ɬ™tre, whichhas not changed much since its founding, even if its core demographicnow includes, to his delight, retired chief executives andsome folks who are still active on Wall Street. Sonnenfeldt, alarge man with closely shorn white hair and the paunch of someonewho has done an enviable job of enjoying his wealth, hadcome into a small fortune years earlier when he cashed out alarge real estate project while still in his early 30s, yet he had lostmoney on poor investments. He was determined not to make thesame mistake again.”We have a lot of people here who have been fantasticallysuccessful entrepreneurs,” he says, “but basically mediocre investors.”New York, of course, is full of men and women who wouldhappily – some might say greedily – help anyone rich enoughto join a group like Tiger 21. The large investment banks, likeGoldman Sachs and Merrill Lynch, have entire divisions dedicatedto helping the wealthy manage their money. But advicetends to be expensive and also antithetical to the typical Tiger 21member, a self-made entrepreneur whose net worth is between$50 million and $70 million and for whom jobbing out so essentiala task seems to be almost an admission of defeat. By bandingtogether, the 145 members of Tiger 21, who collectively have anet worth of around $10 billion, according to the organization’spromotional materials, have ensured direct access to big-shothedge-fund managers and their compatriots in the private equityworld.Yet shortly into the life of Tiger 21, Sonnenfeldt realized thatthe group needed to be about more than wisely tending to one’sstash of acorns. A man who has just sold his business for $20million is worried about preserving his wealth but also strugglingwith the prospects for living off less than $1 million a year when,before the sale, he was spending $3 million annually. Ne’er-dowellkids, nasty divorces, grasping relatives – Sonnenfeldt, aself-described seeker who has practiced meditation on and offthroughout his adult life, quickly realized he had to broadenthe group’s scope. He had given an equity stake in Tiger 21to Richard Lavin, an entrepreneur who had spent most of theprevious decade running support groups for working chief executives.It fell on Lavin, who led the earliest groups, to createa format that allowed members to explore these more personalissues. The demand for this kind of thing has been so great thatthere are now nine circles or groups of 12 members each basedin New York, and there is one each in Palm Beach, Miami, LosAngeles, San Diego and the San Francisco Bay Area. Additionalgroups are being formed in New York, San Francisco, PalmBeach and Dallas.Tiger 21 meetings begin with what those inside the organizationcall the World Update. Though the label suggests ahigh-level discussion of international affairs – even if throughthe prism of each member’s global investments – the discussion,at least on the day I visited, focused mainly on each member’stravels since the last meeting. Myles, a financial adviserwith great waves of gray and white hair, leaned back in his chairand, with arms crossed, started things off with the details abouthis recent trips, first to Cancun, then to India. Ziel Feldman, areal estate investor in his 40s, used most of his time to chroniclehis week at a Four Seasons in Mexico. A former executive at aconsulting firm read from a note card and described loungingaround a resort in Jamaica, which prompted jokes about smokingspliffs on the beach. Others shared with the group tales oftrips to the Virgin Islands, the Galapagos and Antarctica, amongother far-flung destinations.Investments made or investments being pondered was anotherbig topic that morning, as were first, second and third homes.One member, who declined to be identified, told the group hehad disappointing news: the new house wouldn’t be ready for atleast another eight months. The generally prosperous-looking,all-male group around the table – 10 of Tiger 21’s 14 supportcircles have no women in them – nodded in sympathy whilethe rumpled speaker sadly accepted their support. Anothermember, a retired software executive who was calling in viaspeakerphone from Palm Springs, said he and his wife weretrying to decide whether it made sense to purchase vacationproperty there, given how much they enjoyed the place. Apparently,several members were wondering the same thing, becausesuddenly the group was debating the merits of owning versusrenting second homes in an uncertain real estate market.It was approaching the lunch hour when a nebbishy-lookingman wearing an off-the-rack gray suit was ushered into theroom. This was the first of two presenters invited that day topitch investments to the group. (The morning offering was opento those willing to invest at least $500,000; the afternoon onerequired a minimum commitment of $2 million.) The first presenterwould not have to sell his fund very hard; over the previousdecade he had earned annual returns of 21.4 percent fromgas and oil pipeline partnerships.”Hurry up and leave,” said Barry Kaye, a heavy-set insurancesalesman who wore a bulky gold watch. “We want to talk aboutyou.”Tommy Gallagher was among those who expressed his appreciationfor the presentation of the pipeline partnerships. Thatprompted groans around the table. “Oh, no, the kiss of death!”one member cried out, eliciting a roar of laughter from thegroup. Earlier in the day, Gallagher mentioned that two of theinvestments he made in 2006 had been losers, though stocksgenerally performed exceedingly well that year. So all day hismates razzed him about his rotten luck – and, if anything, Gallagheronly encouraged them, despite the impressive returns hehas earned since losing his job in 2001.”Sometimes a group needs a punching bag,” Gallagher toldme later. “And for some reason, I was it that day.”Technically, Gallagher belongs to Group 2, not Group 4. But inrecent years he has been helping Michael Sonnenfeldt run Tiger21 in exchange for an equity stake in an organization that imaginesit might one day sell gold-plated medical plans and similarniche products to its members. So Gallagher, who attends fourto six group meetings per month, vets new members and, moreimportant, serves as a kind of role model for each support circleas it is forming. One critical component of every Tiger 21 meetingis the Portfolio Defense, which is when members hand outcopies of their financial holdings to everyone around the tableand brace for an hour or so of feedback. “A transformative experiencethat creates unparalleled bonds among members” is howSonnenfeldt describes the Portfolio Defense on Tiger 21’s Website. “After achieving a level of trust where they can talk freelyabout financial matters, members find personal matters easy toshare by comparison.” Gallagher is the first member in each newsupport circle to submit to a Portfolio Defense.”I’m the DNA carrier,” he says. “Everyone in the joint knowshow much I’m worth.”Yet intimacy tends to come easier to Gallagher than to mostof his peers. When the man whose new house wasn’t going tobe ready for months wistfully spoke of selling his business, Gallagherinterjected, “It’s great – for three months.” But his fellowmember was having none of it; as it is, he said, he devotes alarge portion of his workday to his investments, and as a result,he feels he is shortchanging both his work and his portfolio.Gallagher pressed his view that there is more to life than playingwith your money. It’s difficult finding meaning and structurein life without work. But rather than taking up the point, JakeJacobson instead suggested that Gallagher might be better offdevoting more time to his investments, given his recent trackrecord. Again the group burst into laughter and the momentpassed.Perhaps Jacobson should have consideredwarning his cohort away from his investments.When it was his turn to submit to aPortfolio Defense, he only wished he hadbetter news to share with the group. Theyear 2005 had been what he described as an”exceptionally good – and lucky – year”;his net worth had swelled 60 percent. But in 2006 his investmentsfell by 2 percent, largely because of a trio of stocks and adecline in the value of one of his real estate properties.”My winners couldn’t offset my pukers,” he said.The details of Jacobson’s holdings were spelled out in a densehandout that had been placed in front of every member. His networth (he asked me not to reveal the exact amount) was in thetens of millions, yet his spending had been equally prodigious.The living expenses for him and his wife alone exceeded $1million in 2005. Last year the couple spent $687,000, not includingthe $400,000 they gave to charity and $2.6 million intaxes. He patted the belly straining his shirt and said he had beenoverindulging in good food and wines, neither of which, he offered,were doing his health or his bottom line any good. He hadenjoyed himself in 2006, but he worried that he was not “smartenough to pick” the right investments.”I had a really crummy year,” he confessed glumly.But his fellow multimillionaires were unswayed. They wentaround the room, member by member, just as they had doneafter hearing from the visiting money managers and a lunchtimespeaker, an economist. There was talk about bulking up hisinternational holdings but more typical were the comments ofZiel Feldman, who told Jacobson: “I’ve been listening to you forthree years. There’s a certain comfort level that I perceive that Ihaven’t heard before.”Another member, Amnon Bar-Tur, whose exotic accent, VanDyke beard and crinkly eyes give him the air of a count, said:”It’s very nice how you talk about where you are. We all want tobe where you are.”The exchange was sweet, even loving, but later I mentionedto Bar-Tur that the session with Jacobson had hardly been whatyou might overhear as a fly on the wall, say, at a group therapysession in a psychologist’s office on the Upper East Side. Jacobsonmentioned that he was still buying and selling real estate,yet wondering if he should, as his wife has suggested, try disconnectingcompletely from the work world to see how it feels.”I’m starting to scratch that itch,” he told the group.But the group summarily dismissed this idea. His comradesmight have asked if a compulsion was driving him to continueto acquire properties. Or they might have engaged him in a conversationof what is enough. He had told the group that morethan anything else, he wanted to enjoy life to its fullest, andsometimes he resented the constant intrusion of business on hisdaily life. Perhaps he was channeling his wife’s wishes ratherthan voicing his own – another subject ripe for discussion. Butinstead of raising this or other issues, his fellow Tiger 21 membersoffered Oprah-like affirmations that made him feel good butdid not get to what seemed core issues.Bar-Tur did not challenge this characterization. Men as creatures,he said, tend not to talk as easily about personal mattersas women. A man can be a lonely character who hides behindhis strength.Yet don’t underestimate the value of what Tiger 21 offers, hesaid. For several years now, he has watched and listened as hisfellow group members have struggled to share their lives withthe group. The very act of giving a narrative shape to one’s lifestory, he said, not only helps the rest of the group better understandthat person and his issues and priorities; it also helps thepresenter focus on the rationale for decisions he has made anddecisions he is considering. That level of depth means the groupis uniquely qualified to challenge someone when he is veeringoff track or dreaming of something that from the perspective ofone or more members of the group could prove disastrous.”A place where you can share your personal challenges andhave a really wise group of people who really know you giveyou their views is a very rare thing in life,” he said. “And it’sworth a lot. I’ve seen it where the advice we’re giving someoneis literally worth millions of dollars.”Gary Rivlin is a reporter for The New York Times. He is the author,most recently, of “The Godfather of Silicon Valley.”