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3 Things Family Offices Do Better Than Pension Fund Investors

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publicfundsWhere do the super rich go to manage their money? Often times, the needs of wealthy people cannot be met with a financial advisor or bank, thus the creation of the family office – a vehicle reserved to manage the financial and personal affairs of a wealthy family. Microsoft founder Bill Gates, worth an astounding US$ 81.6 billion, has Kirkland-based Cascade Investment, LLC as his family office; Michael Larson manages it. Larson chose the name Cascade Investment to avoid the public spotlight. Other billionaires have a family office like Michael Dell, who has MSD Capital, L.P. and investment guru George Soros with a US$ 25 billion plus family office. These families offices rival the sizes of some sovereign wealth funds and pensions. The large family offices typically are professional in nature, hiring talent off Wall Street and former hedge fund managers. For example, MSD Capital has over 100 employees, with offices in Los Angeles, New York and London. John Phelan co-manages MSD Capital with a background working at ESL Investments, Zell-Merrill Lynch Real Estate Opportunity Funds and Goldman Sachs. Dell’s family office invests in private equity, distressed securities, hedge funds, real estate and listed equities.

Depending on the fund investor, sometimes the consultant has near regal power, causing great fear among private equity funds, real estate funds and traditional asset managers.

These billionaire-backed family offices share some characteristics with sovereign wealth funds. Both sovereign funds and asset-heavy family offices are typically long-term in nature and unconstrained by classic liability structures, such as pension payouts. What can the average U.S. public pension learn from family offices, or at least the offices’ with successful track records?

1. Access to Unique Club Deals and Unique Private Equity Opportunities
In many circumstances, family offices are tied to a billionaire industrialist or technology guru (Bill Gates, Microsoft). These CEOs and former CEOs naturally have deep networks of contacts and advisors, giving their family offices deal flow. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Altitude Infrastructure Gets Financing on Haute-Garonne Network Project

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Altitude Infrastructure SAS inked a 25-year concession agreement and closed a debt financing package for the deployment and maintenance of an ultra-high-speed broadband network in Haute-Garonne. Haute-Garonne is a department in the south of France.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Guggenheim Partners Agrees to Acquire Millstein & Co.

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On July 11, 2018, Guggenheim Partners inked a deal to acquire New York-based Millstein & Co., L.P., an advisory firm formed by Jim Millstein. Millstein will become co-Chairman of Guggenheim’s securities business. Millstein & Co. will become part of Guggenheim Securities, the investment banking division of the company. Ronen Bojmel will lead the combined Guggenheim restructuring team.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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GIC Holds Steady, Maintains Cautious Investment Stance

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Singapore’s GIC Private Limited returned a 5-year return of 6.6% ended March 31, 2018. At March 2018, GIC had increased cash and nominal bonds up 2% to 37% of the total portfolio, while lowering exposure to developed market equities from 27% to 23%.

GIC CEO Lim Chow Kiat commented in his annual letter in the FY 2017-2018 report that, “In view of the high asset valuations, the increased risk of monetary policy tightening across different jurisdictions and the elevated uncertainty, we maintain a cautious investment stance. Nevertheless, we remain ready to take advantage of potential dislocations. The jump in market volatility experienced in early 2018 offered an indication of potentially bigger market turbulence and opportunities in the future.”

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