March 2017 | bloombergbriefs.com FAMILY OFFICE 2017 OUTLOOK Bloomberg Reports Managing Editor Contents Paul Smith 02 Billionaires Editor Darshini Shah 03 Launches Creative Director 04 Q&A: Jennifer Capouya, GenSpring Family Offices Robert Vargas 06 Hedge Funds Art Director Pekka Aalto 07 Q&A: Clark Cheng, Merrimac Contributing Art Directors 08 Venture Capital Ian Maready Chris Yerkes 10 Q&A: John Tsui, Peninsula House Marketing & Partnership Director 12 Wine Courtney Martens [email protected] 13 Art +1-212-617-2447 16 Philanthropy Advertising Lucy Rosen [email protected] +1-212-617-6759 Reprints & Permissions Lori Husted [email protected] +1-717-505-9701 x2204 To contact the editor responsible Darshini Shah [email protected] +44-20-3525-0790 Produced by Bloomberg Briefs On the Bloomberg terminal at BRIEF<GO> Take your free trial of Bloomberg Brief newsletters today The newsletters pull together reporting, insight and analysis of over 45 senior editorial staff and dedicated economists to help you stay informed and ready for your daily business needs. To set up your free trial Visit bloombergbriefs.com or call us at +1-212-617-9030. Ask about our group subscription savings. © 2017 Bloomberg LP. All rights reserved. This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints group listed above for more information. 1 BILLIONAIRES Many of the World’s Wealthiest People Are Getting Older — and Plotting What’s Next By TOM METCALF LORENZO SERVITJE SENDRA was Nearly Half of the World’s 500 Richest People Are Pensioners the oldest person on the Bloomberg Billionaires Index when he died in February with a $4.2 billion fortune. Thinking ahead, the Mexican billion- aire had already transferred his stake in 60s Grupo Bimbo, the world’s largest bread- 26% maker, to his heirs, enabling them to sidestep what amounts to a $2.1 trillion headache for the wealthy. That’s the total net worth — roughly equal to the gross 50s domestic product of India — controlled 19% by the 218 billionaires over age 70 on the Bloomberg index, a daily ranking of the Over 70 world’s 500 richest people. 40s 44% “By far the biggest handover ever to 8% the next generation is about to happen,” PWC and UBS noted in a 2016 report on billionaires. “Without careful planning, many of today’s fortunes will suffer sub- Under 40 years old stantial erosion.” 3% The problem is most acute in the U.S. and Europe, where about a quarter of Source: Bloomberg Billionaires Index the billionaires on the index are age 80 or older, compared to 20 percent in Asia. In mainland China, where only chemi- media company’s efforts to make deals person and has pledged to give almost cal maker Xu Chuanhua has reached that to stream programs on the internet. all of his $79 billion fortune to charity, a milestone, just 3 percent of the wealth is move that’s been followed by 156 of the in the hands of the elderly, with about 40 Tax-Friendly Structures world’s richest people, including No. 1, percent held by billionaires under age 50. Swedish billionaire Ingvar Kamprad and Bill Gates. Russians have their own version of Germany’s Dieter Schwarz side-stepped the headache, with private wealth con- that risk through elaborate, tax-friendly trolled mostly by a generation of busi- holding structures they created to nessmen who profited from the chaotic control assets when they’re gone. The problem is most post-Soviet economy. For those billion- Italian billionaire Leonardo Del aires, passing the business on isn’t an Vecchio, 81, sold Luxottica Group SpA, acute in the U.S. option when so much of the value is the eyewear business that makes up the and Europe, where tightly woven into personal connections bulk of his $18 billion fortune, to Essilor at the Kremlin. International SA in January. That was about a quarter of In the U.S., Sumner Redstone’s $3.8 to prevent a tug-of-war among his chil- the billionaires on the billion fortune became embroiled in a dren for control of Luxottica as Del bitter and public feud when the 93-year- Vecchio looks to transfer his wealth to index are age 80 or old’s frail health sparked a legal battle the next generation. older, compared to 20 between his daughter Shari Redstone Then there is the Buffett approach. and Viacom Inc.’s former Chief Executive The 86-year-old Berkshire Hathaway Inc. percent in Asia. Officer Philippe Dauman, hobbling the chairman is the world’s second-richest 2 LAUNCHES Former RICHARD FULD IS backing a multifam- at the Marcum MicroCap Conference on Lehman ily office that will help small-business Lehman’s demise, the financial crisis owners manage their personal wealth, and its aftermath. part of a comeback effort by the former “Why has the belly of America been CEO Fuld head of failed investment bank Lehman ripped out?” he said at the time. “The Brothers Holdings Inc. small companies can’t get financing.” Matrix Wealth Partners, in regis- Matrix Wealth Partners provides Emerges tering as an investment adviser in another avenue for Fuld to court small December 2016, disclosed that it’s and mid-sized businesses, many of partly owned by Fuld. The New York- which are closely held. He won’t be as Backer based firm’s other owners are Matthew involved in the day-to-day operations Rubin and Justin Gaines, both of whom of the multifamily office, which shares come from Neuberger Berman, a the same Manhattan address as Matrix of Wealth- former Lehman money-management Advisors. Daily management will be left unit that oversaw about $255 billion at to Rubin, 45, an architect of Neuberger the end of September. Berman’s investment-strategy group, Advisory The multifamily office will comple- and Gaines, 33, who worked closely with ment Matrix Advisors, a consulting Rubin in building the unit. firm that Fuld set up in the aftermath of Money managers only register Firm Lehman’s September 2008 bankruptcy with the U.S. Securities and Exchange to help small and medium-sized compa- Commission if they expect to oversee By MILES WEISS nies raise cash, according to the filing. at least $150 million of assets within 120 Fuld’s clients could hire days of filing their application, so the Matrix Advisors to help multifamily office may already have them sell their closely held clients lined up. businesses, then turn to Rubin declined to comment on Matrix Wealth Partners for whether he had managed money on advice on how to invest behalf of Fuld while at Neuberger the proceeds. Investment Berman, though both he and Gaines banks such as Morgan confirmed that they had known the Stanley, Goldman Sachs former chief executive officer while he Group Inc. and the former was running Lehman. Fuld was travel- Lehman have employed ing and wasn’t available for comment, similar strategies. according to a spokeswoman. Alexander “It’s a tried-and-true Samuelson, a Neuberger Berman spokes- approach,” said Guy man, declined to comment. Moszkowski, an analyst at Autonomous Research. “If ‘New Initiative’ Richard Fuld you are Goldman and you Like other multifamily offices, Matrix help a company go public,” Wealth will help clients allocate their he said, “you are going to try very hard money among asset classes, assist in to be” the private wealth manager for selecting hedge funds and other invest- the entrepreneur who cashed out. ments, and provide services such as cash flow analysis, estate planning and Matrix’s Roots tax management. The new firm also will Fuld, 70, formed Matrix Advisors in early incorporate the closely held businesses 2009, months after the collapse of the owned by their customers into their firm that he had built into the nation’s investment plans, Rubin said in a tele- fourth-largest investment bank. He phone interview. otherwise has kept a low profile after “This is a new initiative to really Lehman’s bankruptcy, a seminal point in broaden out some of the activity that has the global financial crisis. been done historically,” Rubin said. In 2015, Matrix Advisors consulted on Matrix Wealth will charge an annual the sale of the National Stock Exchange fee of 90 basis points, or 0.9 percent, and, according to a Reuters report, for the first $10 million under manage- Fuld also set up a New York real estate ment, according to the registration. firm called Matrix RE Brokerage. Fuld Its fees decline after assets exceed PHOTO: BRENDAN SMIALOWSKI/BLOOMBERG BRENDAN PHOTO: broke his silence that year by speaking that amount. 3 Q&A Equities and Alternatives Attractive in 2017, De-Emphasize Fixed Income: GenSpring Darshini Shah interviewed Jennifer Capouya, deputy chief investment officer of GenSpring Family Offices, on Feb. 22. Her comments have been edited and condensed for clarity. XXExpects traditional stock market investments to return about 7 percent and the bond market returning closer to 2–3 percent in the “long term” XXLikes long-short strategies to capitalize on falling market correlations, and global macro strategies to capture the trends in rates, currencies and commodities XXGenSpring’s AUM total $8.6 billion, with AUA of $11.6 billion “We’re still anchoring portfolios with a tilt toward the U.S. and we like sectors that are more cyclically orientated — energy and financials, for example.” Q: What is your outlook for traditional Q: What do you expect in the near term? investments over the long term? A: We see an economy and markets — a clear framework with an alignment A: Longer-term, we expect traditional that are at a crossroads.