How do family offices divide their investment portfolios?
Short answer: Richard C. Wilson says families may outsource stocks, bonds, commodities, fund managers and ETFs, choose real estate deal by deal, and keep the most control over businesses tied to their experience. He names senior living and auto parts manufacturing as examples of those direct investments. (10:11)
In a Family Office Q&A webinar, Richard C. Wilson answers audience questions about how family offices invest and manage portfolios.
Market exposure
Richard C. Wilson says the first area is diversified market exposure, including stocks, bonds, commodities, fund managers and ETFs. He says this part is usually outsourced unless the family created its wealth in that area. (10:39) (at 10:39)
Cash flowing real assets
Wilson describes the second area as conservative real assets, such as real estate, with collateral or tangible value. Families are more hands on here and often choose investments deal by deal. (11:08) (at 11:08)
Direct investments in businesses
Wilson says the third area is direct investment in the field where the family built its wealth. A family may want the most control there because it can have strong knowledge and connections in that market. (11:35) (at 11:35)
Control varies by area
Wilson says families usually do not want to control every part of every investment. He describes choosing more control in one area, partial control in another, and little control in a third. (12:03) (at 12:03)
"they might be the leader in that market and they have superior information connections distribution etc."
From Richard's exclusive Billionaires.com interviews
Lessons from Richard C. Wilson's one-on-one interviews, as published on each interview page.
- Michael Lee-Chin: Invest in what people will do next. He saw that his generation would shift from consuming to saving and investing. He chose wealth management companies over banks and insurers to avoid underwriting losses.
- Tom Rosen: Buy when the market is down. Tom bought a lot when the stock market almost collapsed and made a substantial profit. In the year that followed, oil and gas surged. So did some tech.
- Tim Draper: Teach children about money early. Give them a small allowance and have them earn and invest money in the stock market. Over time they learn to ask sharp questions about how a business works.
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Frequently asked questions
How do family offices divide their investment portfolios?
Richard C. Wilson says families may outsource stocks, bonds, commodities, fund managers and ETFs, choose real estate deal by deal, and keep the most control over businesses tied to their experience. He names senior living and auto parts manufacturing as examples of those direct investments. (10:11)
When might a family office invest in early stage venture capital?
Richard C. Wilson says family offices are more likely to invest at the seed stage or as an anchor when they know the person well or know the field well. (18:37)
Why do family offices review many investment opportunities?
Wilson says reviewing many opportunities can help them spot an anomaly. He gives the example of choosing one investment from 300 rather than one from three. (13:25)
Sources
Quotes are copied from the video captions and checked against the transcript. Timestamps link to the moment in the video. General information only, not legal, tax or investment advice.