FAMILY August 2015

OFFICE www.bloombergbriefs.com

August 2015 Bloomberg Brief Family Office 2

INSIDE

Bedrock's Arazi on allocating to equities, hedge funds in a typical family office portfolio. Page 3.

UFG favors corporate bonds over equities. Page 4. BY DARSHINI SHAH, BLOOMBERG BRIEF EDITOR Worldwide, there are now more than 14,600 families with at least $100 million in Bonderman’s Wildcat family office is assets — the kind of folks who would start or hire a family office — up 42 percent since backing hedge fund for masses. Page 5. 2008, according to the Boston Consulting Group. When setting up a family office, organizers face a two-fold challenge: building a KKR rolls out Petraeus in $4 trillion hunt diversified portfolio capable of growth, and also figuring out how to pass the wealth on to for family wealth. Page 6. the next generation. Indeed, an estimated $36 trillion is expected to transfer to heirs in U. S. households alone from 2007 to 2061, according to a 2014 study by the Center on Leaving kids $63 million is too much, Wealth and Philanthropy at Boston College. Merrill Lynch says. Page 7. With that in mind, Bloomberg Brief brings you insights from managers about their investment decisions and their outlook for the year ahead. Ariel Arazi, managing partner How Citigroup courts wealthy young and co-founder of Bedrock Group, says he is tilting a typical family office portfolio heirs: Teach them to buy art. Page 8. towards equities and hedge funds and less towards fixed income this year. On the other hand, family office UFG Wealth Management, which caters to Russian clients, says a Inside a billionaire’s family office: Navy "dimmed to dismal" outlook for equities has resulted in the firm allocating most of its Seals, yacht captains. Page 9. portfolio to fixed-income instruments. Also read what advisers are saying about leaving too much money to the next Meryl Streep money stays with Simon generation, and how wealthy young heirs are being prepared for their inheritance. family as SEC grants in-laws. Page 10.

Bloomberg Brief: Family Office Bloomberg Brief Managing Editor Contributing Reporters Newsletter Business Manager Jennifer Rossa Margaret Collins Nick Ferris [email protected] [email protected] [email protected] +1-212-617-8925 +1-212-617-6975 Family Office Editor Darshini Shah Jason Kelly Advertising +44-20-3525-0790 [email protected] Adrienne Bills [email protected] +1-212-617-2397 [email protected] +1-212-617-6073 Graphic Designer Rebecca Spalding Pekka Aalto [email protected] Reprints & Permissions +852-2977-6013 +1-212-617-0356 Lori Husted [email protected] [email protected] Sabrina Wilmer +1-717-505-9701 x2204 [email protected] +1-617-210-4676

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Q&A August 2015 Bloomberg Brief Family Office 3

Q&A Bedrock's Arazi on Allocating to Equities, Hedge Funds in a Typical FO Portfolio A: We expect artificial stimulus biased towards event-driven and long- Ariel Arazi, managing partner and co-founder of measures, notably quantitative easing short equity strategies. Increased market Bedrock Group, spoke to Bloomberg Brief's programs, to cause asset price inflation volatility provides a fertile opportunity set Darshini Shah about tilting a typical family office in Europe and Japan. The ECB’s QE for both strategies. portfolio towards equities and hedge funds and program has a long way to run, and Long-short equity managers are less towards fixed income. Bedrock Group was should lead to gains for European benefiting from reduced correlations founded by Maurice Ephrati, David Joory, Sandy equities in the next one to two years. The between stocks, enabling them to Koifman and Arazi in 2004. It oversees $9 billion weak euro and and cheap oil will also be generate more alpha whilst maintaining in assets. supportive. low beta exposure. Event-driven strategies should continue Q: Is Greece a worry? to benefit from a robust pipeline of M&A Q: What is the asset allocation for a A: While Grexit is no more an option in deals, supported by sustained easy typical FO portfolio this year? the short term, we believe that the credit conditions, and distressed A: Our asset allocation currently deviates country’s financial future remains managers have an ample opportunity set from its benchmark primarily in fixed uncertain despite the bailout given its among the assets being sold by income, where the portfolio is continuing reliance on significant European banks as part of their underweight. Allocations to equities and financial bailouts and high existing debt. deleveraging process. hedge funds are broadly in line with the If the situation in Greece were to There is also now considerable benchmark, and the fixed income worsen again, we believe that Europe is divergence between the macro underweight is balanced by cash. For much better prepared than in the past trajectories of the U.S., eurozone, U.K., moderate profiles, we stand at around 40 and that contagion risk is lower. commodity exporters and other percent in equities, 40 percent in fixed countries. We believe that these income and 20 percent in alternative Q: What about China? divergences will provide a rich investments. A: We believe that China is slowing but opportunity set for macro managers and, not breaking and that a soft landing whilst returns will not necessarily be Q: Why are you underweight fixed remains achievable with continuing smooth, they will be uncorrelated from income? enhanced policy support. The country other assets. A: Our fixed income allocation is has the necessary tools to support its unusually far from its benchmark due to economy, with significant reform efforts Q: Do you have any private equity or very low yields and meager return on multiple fronts including key financial real estate exposure? prospects in traditional bonds. In fixed and capital account liberalization. A: It is limited given the poor liquidity of income, we deviate from the benchmark Our exposure to China is mainly those investments and is concentrated in through niche asset classes, which we expressed through our exposure to EM private lending strategies. Our clients classify as 'alternative credit.' This equity managers, which currently do have direct real estate exposure. includes opportunities such as peer-to- have a significant overweight to EM Asia, We also seeded a product leveraging peer lending — a form of consumer including China. long-standing relationships within the credit — and trade finance. Such confidential world of best-in-class strategies offer stable returns of 7 to 10 Q: And you allocate to hedge funds? technology firms that are in their final percent per annum, with minimal A: We are constructive long-term on rounds of private financing before an exit correlation to broader fixed income equities, but expect volatility to persist through IPO or purchase. markets. We also have an allocation to near-term. This should provide a some high yield in Europe, as well as favorable opportunity set for our active Q: What about commodities? exposure to subordinated debt of managers, both in developed and A: We don’t have a dedicated allocation investment-grade companies. emerging markets. to commodities as we don’t have any strong view on the asset class. We do, Q: What about the portfolio's equity Q: What specific hedge fund strategies however, have some exposure to the allocation? do you like? asset class through our macro and A: The portfolio’s equity allocation is A: The hedge fund portfolio is currently commodity trading adviser hedge fund broadly in line with the benchmark, with managers. slight overweights in Europe and Japan and an underweight in U.S. markets. We also maintain our exposure to emerging Age: 47 markets with a small underweight. Education: University of Geneva Family: Married, two children Q: Why are you overweight Europe Hometown: London and Japan? Hobbies: Skiing, art, travel Favorite book: The Kite Runner Favorite restaurant: UNI, London Favorite holiday destination: Verbier Q&A August 2015 Bloomberg Brief Family Office 4

Q&A UFG Favors Corporate Bonds Over Equities issuers — approximately two-thirds — continental Europe. Oksana Kuchura, partner at family office UFG with a third in emerging market corporate Wealth Management, which caters to Russian and sovereign notes. We also Q: How do you cater for that demand? clients, spoke to Bloomberg Brief's Darshini Shah moderately employ derivatives both as A: UFG runs three Luxemburg-based about how a 'dimmed to dismal' outlook for hedges and to enhance returns in a funds, which invest in commercial real equities has resulted in the firm allocating most of difficult market environment. estate both in Russia and Europe and its portfolio to fixed-income instruments. we constantly look at the new Q: Why is such a small part of your opportunities. The current market portfolio in equities? environment in Russia, with the falling Q: How are you catering to wealthy A: Given that markets globally — mainly ruble — makes hard currency Russians this year in terms of their developed countries — face rising investments the most alluring. portfolio allocation? interest rates in the short to medium A: Russian high-net-worth individuals term, our outlook for equities ranges from Q: What is your outlook for the and ultra-high-net-worth individuals face dimmed for developed to dismal for remainder of the year? different challenges — some sold emerging markets. A: Our outlook for the year-end is rising established businesses and started new volatility in emerging market equities and ones, some are reallocating to other Q: Do you invest in alternatives at all emerging markets in general, a jurisdictions, some demand stable cash such as private equity, hedge funds or strengthening U.S. dollar on the back of flow. All these goals require different property? markets’ anticipation of interest rate investment strategies. As for UFG A: Russian HNWI and UHNWI in general hikes in U.S., sideway movements in Wealth Management, 95 percent of our have had quite an upsetting experience developed markets' bonds and equities typical portfolio consists of hard currency with private equity and thus they either and continued weakness in commodities. fixed-income instruments. The rest is abstain from such investments or engage equally split between cash and equity with them personally, devoting lots of Q: Does Greece/China worry you? instruments. time and effort for research and A: We do not believe that China is going supervision themselves. to implode, causing new global crises. Q: Why is most of the portfolio in At the same time, Russians traditionally But its slowing economy is going to add fixed income? like investing in real estate. At the deflationary pressure and will make the A: Due to our clients’ specific liquidity moment, we are seeing growing interest rate hiking cycle significantly less and safety needs, we believe that — both among our clients and Russian aggressive compared with the past. investment- investors in general — to diversify into As far as Greece is concerned, it’s too grade and the highest-ranking high yield European commercial real estate. In the small an economy to truly influence the corporate bonds of issuers from past, the focus of such interest was global outlook. However, its ongoing developed markets are the best places to traditionally concentrated in London, saga is causing regular volatility be in the medium to long term. In the however, following the numerous outbursts, which are worth watching to short term, as we approach a rate hiking financial pick up some interesting European cycle in the U.S., fixed income crises, significant money flows shifted to names. instruments in developed markets would experience elevated volatility. However, as the world economy continues to face slow growth and deflation concerns, Age: 41 bonds of good-quality corporates will Professional Background: Troika Dialog Management Company, bring investors decent returns in UFG Wealth Management. the medium to long term. Education: Kazakh University of International Relations and World Languages Q: Is the fixed income portfolio biased Family: Married, daughter towards developed markets? Hobbies: Yoga, kite surfing, skiing A: The fixed income part of portfolios is Favorite book: The Power of Now, Eckhart Tolle skewed towards developed market Favorite restaurant: Chotto Matte, London

HEDGE FUNDS August 2015 Bloomberg Brief Family Office 5

HEDGE FUNDS Bonderman’s Wildcat Family Office Backing Hedge Fund for Masses BY SABRINA WILLMER AND MARGARET COLLINS David Bonderman amassed a $3 billion fortune in private equity for sophisticated investors. He’s now selling hedge fund strategies to the masses. Bonderman, whose TPG Capital has owned companies such as Continental Airlines and retailer J Crew Group, is using a family office that manages a portion of his money — Wildcat Capital Management — to back a startup investment business. Infinity Q Capital Management is offering retail and other investors a version of the hedge fund programs it uses for the billionaire, said James Velissaris, chief investment officer for the new firm. Run by Wildcat employees, Infinity Q can sell products such as liquid alternative mutual funds to outside investors. It means Bonderman can profit Source: Bloomberg/Andrew Harrer from the expertise of his personal money David Bonderman managers, who in turn can earn more money. in the same direction during periods of undergoing a significant change due to a “Families recognize that over time it’s crisis and would be difficult to quickly high fee structure and several years of sometimes valuable to turn the services sell, he said. underperformance,” Velissaris said. they created into a business,” said Bill They pulled money from outside Infinity Q’s Diversified Alpha Fund has Woodson, head of the North America managers and started overseeing the an upfront sales charge of as much as 5 family office group at Citigroup’s private investments directly, using quantitative percent and an annual expense of 1.95 bank. methods to bet on themes including percent for the Class I shares, which Bonderman, known as Bondo, built his macroeconomic trends, volatility and have a minimum investment level of $1 wealth buying, fixing and selling long-short equity. Since August 2012, million. The fund has gained 5.16 percent companies. Wildcat was set up in 2011 Wildcat’s hedge fund strategies returned this year as of Aug. 14, beating 94 to manage his money and cater to a 15 percent through March 31, Velissaris percent of peers, according to data small group of his friends and relatives. said in an e-mail. compiled by Bloomberg. The family office oversaw $1.3 billion at Wildcat decided the techniques could Infinity Q plans to broaden its offerings the beginning of the year, according to a fit within mutual funds known as liquid to funds using volatility and macro regulatory filing in March, with holdings alternatives. It started New York-based strategies, Velissaris said. It’s also including public stocks and venture Infinity Q last year and the firm now received requests for tailored accounts capital. oversees about $54 million. A that would employ their techniques, he Wildcat shares its name with the Bonderman family entity owns at least 25 said. location of Bonderman’s home near percent of Infinity Q and Potter is chief For Bonderman, who got his start in Aspen, Colorado. Leonard Potter, who executive officer. finance working for Robert Bass’s family previously managed private equity By offering liquid alts, Infinity Q is trying office in the 1980’s, Infinity Q is just one investments for George Soros, runs and to tap into one of the fastest-growing of a range of investments he’s made in is the owner of the Fort Worth-based areas for money managers. The mutual recent years outside of TPG and private firm, allowing Bonderman to focus on funds aim to give investors access to equity. He’s backed online lender TPG, the $75 billion firm he co-founded complex strategies that can use Kabbage, and Kite Pharma, a developer in 1992 with Jim Coulter. derivatives and borrowed money, and of cancer drugs that went public last year. The family office’s initial focus was still let investors withdraw their money on “Bonderman has had the itch to expand improving the performance of its hedge a daily basis. The funds attracted a into investment areas beyond what TPG fund holdings, according to Velissaris, a record $16.5 billion last year, according is confined to,” said Erik Gordon, a former Harvard University football player to Morningstar, raising total assets to professor at University of Michigan’s who studied financial engineering and about $158 billion. business school. “He definitely has the economics. The investments were moving “We think the hedge fund industry is money.”

PRIVATE EQUITY August 2015 Bloomberg Brief Family Office 6

PRIVATE EQUITY KKR Rolls Out Petraeus in $4 Trillion Hunt for Family Wealth BY MARGARET COLLINS AND Private Equity Investors JASON KELLY It was an invitation too good to resist. Matthew McCarthy was asked by KKR to fly to New York from Ohio, where he manages money for the founders of a consumer-products company. First he had dinner with KKR’s billionaire co- founder Henry Kravis. The next morning, he met David Petraeus, the former director of the Central Intelligence Agency and current chairman of the KKR Global Institute at the company’s headquarters. “They didn’t really pitch products,” said McCarthy, whose firm Rockside Capital Partners intentionally stays under the radar. “They brought out General Petraeus.” McCarthy is the type of investor that KKR and its private equity competitors including Blackstone Group and Carlyle sold to, said Lawrence Calcano, a Private equity firms — once they track Group are increasingly courting. Family managing partner at iCapital Network, an down family offices — face intense offices and their advisers manage an online marketplace for private equity competition to woo them from both larger estimated $4 trillion, including for the funds. and smaller rivals. newly rich in Silicon Valley and China, Private equity firms want wealthy BlackRock, the world’s largest asset Midwestern entrepreneurs and old families for more than just their money. manager, has amplified efforts to serve money in Europe. Family offices bring expertise in buying the group by hosting summits with The money managers are responding companies, usually have fewer speakers including its chief executive by adding staff, holding conferences and regulatory restrictions and can take officer, Larry Fink. The company has offering sweeteners, including reduced bigger risks than pensions or more than 20 people dedicated to fees on investments. endowments, Michael Arpey, a managing working with them in the U.S. and has Efforts are paying off. Blackstone, director at Carlyle who oversees added staff in London, Hong Kong and which last year started reaching out fundraising, said in an interview. Australia, said Brian Feurtado, who leads directly to family offices and hosting William Heitin, who works for families the group for the New York-based firm in forums for them, has $43 billion of its including the founders of fitness the U.S. $310 billion under management from company Reebok International and Stacy’ “There’s been an explosion of family private wealth, more than triple the s Pita Chip, was invited by Blackstone offices,” Feurtado said. “It’s a very, very amount five years ago, the firm said in last year to an event at the Waldorf vibrant and growing industry.” May. Across private equity, family offices Astoria hotel followed by time in the There are an estimated 4,000 family account for about 6 percent of capital, up company’s New York headquarters with offices globally, according to London- from 4 percent in 2010, according to senior executives. based researcher Campden Wealth. research firm Preqin. Many of his clients are entrepreneurs Some private equity firms are enticing Industry executives say the percentage who have built and sold their own family offices to invest with the promise should be higher. businesses so they can help private of co-investment opportunities. That’s The firms are seeking new pools of equity managers vet deals, said Heitin, when families invest alongside the firms wealth to lessen their reliance on state whose Waltham, Massachusetts-based rather than through a pooled vehicle, and and corporate pension plans. They’re Windrose Advisors manages more than are charged reduced or no fees. While it also reaching out at an opportune time. $2 billion. sounds good to investors who are more Globally private equity firms reaped a “We have a client that started and sold sensitive to costs, the offerings may not record $428 billion by selling holdings a major food company,” said Heitin, result in better returns, according to a last year, a 30 percent increase from Windrose’s chief investment officer. “If 2015 study by professors Josh Lerner 2013, according to Preqin. the private equity firm is looking at a deal and Victoria Ivashina of Harvard Cracking the network of rich families with a food company, we put them in Business School and Lily Fang of isn’t easy because it requires uncovering touch and then there may be a co- INSEAD. people who don’t necessarily want to be investment opportunity for the family.”

SURVEY SAYS… August 2015 Bloomberg Brief Family Office 7

SURVEY SAYS… Leaving Kids $63 Million Is Too Much, Merrill Lynch Says

BY MADELINE MCMAHON AND The purpose of the survey was to wealthy from social media gives the MARGARET COLLINS understand the intentions behind impression that the next generation in Some parents are concerned about individual decisions when transferring wealthy families spend all their time leaving excessive amounts to their wealth. drinking champagne on yachts, flying offspring, for fear of creating a sense of “There’s a lot of intensity around these private jets to St. Tropez, or deciding entitlement. Others are afraid of leaving questions,” Stacy Allred, a managing whether to take the Bentley or the Ferrari too little. But just how much money does director in Merrill Lynch’s private banking for a spin,” according to the report. These that actually mean? and investment group, said of family stereotypes may encourage families to Bank of America’s Merrill Lynch asked dynamics associated with wealth avoid the topic, which can impede these questions to high net-worth transfer. defining priorities of giving, the report individuals, and some of the findings are Generational giving isn’t always seen in said. in the graphic below. a positive light, the report said. “One blog that compiles photos of children of the

PREPARING THE NEXT GENERATION August 2015 Bloomberg Brief Family Office 8

PREPARING THE NEXT GENERATION How Citigroup Courts Wealthy Young Heirs: Teach Them to Buy Art BY MARGARET COLLINS AND The Drain on Family Wealth REBECCA SPALDING The team went all in on Kate Moss. One evening in June at Citigroup in downtown Manhattan, a group of 20- somethings spent $95,000 in a bidding war for a black-and white photo tapestry of the fashion model’s face. They were confident that the work by the prominent New York artist Chuck Close was worth the price. That’s why there was a collective gasp when Tash Perrin, a senior vice president at Christie’s, revealed that the work didn’t sell when it was last auctioned in 2013. The sale and money that the 40 participants used to bid with was fake, but the lesson on valuing and buying art was real. The attendees, from wealthy families in 18 countries, are poised to inherit enough money in coming years to purchase some of the items they were Boudewyn, a managing director in Wells quality, rarity, condition and history of shown at the event — from Cartier Fargo’s Abbot Downing unit. ownership. Attendees then bid on pieces earrings worn by Elizabeth Taylor to a “Company valuations are higher than in that have been, or will be, auctioned Bjork album cover photograph. For firms past years, including family-owned and including an Andy Warhol polaroid print like Citi Private Bank, teaching them how controlled companies,” said Boudewyn, of Giorgio Armani and a pair of ear clips to invest in art is one tool to help retain whose clients generally have at least $50 by Seaman Schepps formerly owned by the heirs when the family wealth is million. “Many families who never the Duchess of Windsor. Perrin then passed on to them. seriously contemplated selling are now showed the teams what the works really “You don’t have the birthright to the fielding offers they can’t refuse.” sold for so they could see if they spent next generation’s wealth,” said Money Citi Private Bank’s event included a their money wisely. Kanagasabapathy at Citi Private Bank, session on buying art because the asset Wells Fargo’s Abbot Downing and U.S. who directs such events for clients’ class is increasingly seen as an Trust, a unit of Bank of America Corp., children. “We want to continue to have investment, with global art sales hitting a have a financial education curriculum the relationship with the family.” record in 2014 as new collectors drove with individual coaching instead of boot In the past, wealth managers haven’t up prices for trophy works. camps. Some parents or grandparents been so successful at keeping younger Other banks including Credit Suisse require heirs to take it before telling them clients. On average, firms have seen Group, Deutsche Bank, UBS Group and how wealthy they are and what they will almost half of the assets leave when a Coutts, a unit of the Royal Bank of inherit, said Chris Heilmann, U.S. Trust’s family’s wealth is being handed to the Scotland Group, run training camps for chief fiduciary executive. In June, the next generation, according to the latest clients’ children. Held in countries bank added a program for teenagers as figures from a report on global private including Singapore and Switzerland, the young as 13. banking by consulting firm programs usually span several days to The young adults who attended PricewaterhouseCoopers. more than a week and participants often Citigroup’s event have jobs and even Banks are trying to reverse that trend fly in from around the world. The some master’s degrees, but their parents because an estimated $36 trillion is seminars — which cover topics such as want them to hone skills that are unique expected to transfer to heirs in U.S. sustainable investing, philanthropy, to their wealth — such as bidding on a households alone from 2007 to 2061, entrepreneurship or how to protect your Picasso or taking over a family business, according to a 2014 study by the Center family reputation and brand online — are said Kanagasabapathy. on Wealth and Philanthropy at Boston free to attend while clients generally “There is no tolerance today for an College. The figure swells when including cover their own travel and incapable CEO,” he said. billionaires worldwide, a majority of accommodation. Wealth managers like Citigroup said whom are over age 60 and have more During the Citi Private Bank event, they hope the trainings will strengthen than one child. experts from Christie’s helped both family profits and bank loyalty. The U.S. economic recovery also has participants review a mock catalog of “It’s easier to retain a client than to get accelerated parents’ desire to prime a new one,” he said. children for what’s coming, said Arne August 2015 Bloomberg Brief Family Office 9

about a dozen works. They advised each team on criteria to determine value: a work’s

PROFILE August 2015 Bloomberg Brief Family Office 10

PROFILE Inside a Billionaire’s Family Office: Navy Seals, Yacht Captains BY MARGARET COLLINS Family Office Assets Under Management Managing the life of Sergey Brin is big business. Through Bayshore Global Management, the Google co-founder has hired former bankers and philanthropy experts to help manage his estimated $33 billion fortune. He’s employed a former Navy SEAL and SWAT team veteran for security, and a yacht captain to handle his aquatic endeavors. A fitness coordinator, a photographer and archivist help run his life. Bayshore, based in Los Altos, California, provides a glimpse into the services family offices bestow upon the wealthy beyond investing and accounting. There are now more than 14,600 families with at least $100 million in assets globally, up 42 percent since 2008, according to the Boston Consulting Group, Deutsche Bank and other family former U.S. Secret Service agent and Group. Many of these have set up their offices, according to LinkedIn profiles founder of New York-based Insite own offices to help manage investments that list Bayshore as their employer. It Security that provides protection services and day-to-day lives. has employed at least 47 people to clients such as family offices. Family offices serving the world’s according to Department of Labor filings. There are layers of personnel including billionaires usually employ at least 50 These include a chief of staff and former military and law enforcement people, with staff across multiple teams manager of the family’s New York City experts who are responsible for locks on including executive, administrative and home, who oversaw construction, doors and gates, background checks on investment groups, according to London- recruited domestic staff and provided staff, and managing travel and aircraft based researcher Campden Wealth, personal shopping. security, Falkenberg said. which started collecting the data last Brin also owns Passerelle Investment, They don’t come cheap. A security year. a real estate firm. It’s bought properties director who’s a former FBI agent can Vulcan, the Seattle-based company in Los Altos to help revitalize the town for command at least $200,000 a year, he created by Microsoft co-founder Paul businesses and families, according to said. That can be double a typical salary Allen and his sister Jody Allen, has more Passerelle’s website. working for the government. than 500 people. The family office Representatives for Bayshore declined Salaries at family offices vary widely, features an in-house media company, a to comment. said Natasha Pearl, chief executive 17-member team managing a multi- Brin emigrated to the U.S. from the officer of Aston Pearl, which serves billion dollar investment portfolio and a Soviet Union as a child with his family. single-family offices that have at least division that’s working on space travel. He also runs the Brin Wojcicki $400 million. Pearl's New York-based Vulcan is also currently hiring a chief Foundation with his wife, Anne, that firm has helped families hire investment officer and wildlife disburses charitable donations and cybersecurity experts, find college conservation expert among other supports human rights. advisers and create procedures for staff positions, according to its website. Brin was the 15th richest person in the at multiple residences. Allen, who has an estimated net worth world as of Aug. 24, according to the Private chefs can command salaries of $17 billion as of Aug. 24, according to Bloomberg ranking. Controlling a fortune from $40,000 to as much as $200,000 a the Bloomberg Billionaires Index, named of that size requires professional year with full benefits depending on Vulcan after the Roman god of fire. He’s security. Bayshore brought in the former whether they have top restaurant also a Star Trek fan. Navy SEAL to provide protection, experience and have worked with other Bayshore gets its name from the according to a LinkedIn profile. A former wealthy families, Pearl said. College- location of Google’s headquarters, an U.S. Secret Service agent directed adviser fees, a growing area, can range area in California known as North security programs, and a former SWAT from $5,000 to $25,000. Bayshore. It’s existed since at least team operator oversees the family’s “It’s not like the ‘blue book’ where you 2006, two years after Google, the world’s properties and emergency procedures. look up chief risk officers or chefs and largest search engine, had its initial Some of the largest family offices have there are standard comp rates,” she said. public offering. operation centers to monitor people and “It’s a very fragmented market.” property, said Christopher Falkenberg, a August 2015 Bloomberg Brief Family Office 11

The company’s employees have been recruited from Google, Goldman Sachs

REGULATORY August 2015 Bloomberg Brief Family Office 12

REGULATORY Meryl Streep Money Stays With Simon Family as SEC Grants In-Laws BY MARGARET COLLINS also don’t have to disclose equity didn’t respond to a request for comment. Private investment firms in the U.S. holdings even after rules enacted in the The Simon’s family office was among a that manage the wealth of a single family wake of the 2008 financial crisis handful of firms who filed applications are winning the right to service in-laws increased oversight of investment with the SEC after the rules related to in- and their relatives. advisers. laws changed in 2011. They are also For the descendants of William E. Keeping their privacy came with a among the first to have their requests Simon, Treasury Secretary under catch. When the SEC defined family granted, after more than two years. Presidents Richard Nixon and Gerald R. members in rules issued in June 2011, it The SEC approved in July 2014 a Ford in the 1970s, that means they can said families could designate a common petition from the Duncan Family Office, keep managing money for Meryl Streep ancestor, whose descendants could be which sought to keep advising a mother- and her foundation within their family served by the office. The designation of in-law who had been a part of the family office. that person rather than a husband and for at least 16 years, according to the The Simons, who have advised their wife, means providing services to a filing. The firm serves billionaire former sister-in-law for 26 years, sought spouse’s parents, siblings or nieces and descendants of Dan L. Duncan, who permission from the U.S. Securities and nephews could force registration as a founded the Houston-based energy Exchange Commission after a 2011 rule commercial investment adviser. company Enterprise Products and died in tightened the definition of family clients. 2010. Duncan’s four children have a The regulator on Jan. 20 granted their combined estimated wealth of $15 billion petition, according to an SEC document as of Aug. 24, according to the that didn’t identify Streep. Two people "There isn’t any real Bloomberg Billionaires Index. familiar with the matter said the former That same month the regulator granted sister-in-law is the Oscar-winning compelling reason for an exemption for the Gruss family. The actress, whose brother Dana was financier founded New York-based Gruss recently divorced from Mary Simon, a the public to know & Co. and specialized in oil and gas daughter of the ex-Treasury Secretary. industry mergers. The family office won The Streep decision followed similar how a family office concessions to keep advising sisters-in- orders granted to the offices that serve laws and their families. the billionaire heirs of energy tycoon Dan operates." Martin Lybecker, an attorney at Perkins L. Duncan and descendants of the New Coie in Washington, who represented the — DAVID GUIN, WITHERS BERGMAN York banking dynasty of Joseph S. Duncan and Gruss family offices in their Gruss. By winning SEC approval, the applications, declined to comment on the single- families or the SEC’s decision. family offices are redefining how broad “We’ve had to restrict who’s been able Families have to apply to the SEC on a they can be without divulging information to invest through the family office,” said case-by-case basis. Another application about the wealth they manage or Bradley Van Buren, an attorney and from D-W Investments, which provides triggering regulatory scrutiny. partner at Holland & Knight in Boston services to the descendants of Myron A. “There isn’t any real compelling reason who works with family offices. Wick, Jr., was granted in May. The for the public to know how a family office In the case of Streep and the Simons, petition asked to keep advising a sister-in- operates,” said David Guin, a partner at the SEC accepted the family’s plea, law and a trust that she’s a beneficiary Withers Bergman who specializes in which argued that the former sister-in-law of, according to the document. Wick was securities regulation for family offices. “If is an integral part of the family whose the CEO of Dominick & Dominick, the you’re a commercial adviser, the purpose assets were managed by them for more investment banking house, according to of registering is to make sure there is a than two decades, according to the filing. a 1990 obituary in the New York Times. certain level of available information and That familial relationship shouldn’t mean The 2011 rules will be an issue for compliance in place for their investors’ that the firm is a commercial investment more family offices over time who want to protection.” adviser, according to the petition, which expand their clients without registering. Family offices, which have existed for didn’t disclose the assets overseen by That’s because the designation of a more than a century to handle the the firm. common ancestry will affect in-laws on financial affairs of the wealthy, oversee Peter Simon, a son of William E. Simon one side of a familial lineage with each an estimated $4 trillion globally. They and a co-founder of their namesake firm successive generation, Lybecker wrote in typically don’t have to register with the in Morristown, New Jersey, declined to a 2013 book titled “Investment Adviser SEC like other money managers, comment. Streep’s publicist at 42West, Regulation.” avoiding certain compliance costs. They

August 2015 Bloomberg Brief Family Office 13