Low Risk Rules: A Wealth Preservation Manifesto by Geoff Saab

Author:Geoff Saab [Saab, Geoff]
Language: eng
Format: epub
ISBN: 9781774581742
Google: Yo0WzwEACAAJ
Amazon: 1774581744
Publisher: Page Two Press
Published: 2022-04-24T18:30:00+00:00

Hedging against profits

By now I feel a bit like I’ve been beating a dead horse, and I’m sure you can see why the HNW Industrial Complex is so eager to sell you prestige investments.

Ultimately, we make money in the wealth management business in one of two ways. If we’re charging a fee as a percentage of assets under management, we can either charge a lot, or ensure we retain the client assets for a long time. Even better if we can do both!

And so what if I could convince you that I’ve built something that is supposed to provide “uncorrelated returns” over the “long term”? You couldn’t get mad at me for not keeping up with a rising market, because it’s uncorrelated, remember? My product is designed to decrease your overall portfolio risk.

So this segment of your portfolio will likely stumble along over the years… not losing too much, not making too much. Just enough “uncorrelated” returns to cushion portfolio volatility.

This is how most hedge fund products work—especially a hedge “fund of funds” that your banker or family office professional may have sold you. By combining all sorts of different strategies into a fund and telling you not to expect it to outperform, they are ensuring that you’ll have this miserable little fund in your portfolio for several years—maybe forever. And you’ll forget what it is every year and ask your advisor and they will say, “Oh, that? That’s there for risk management. It’s uncorrelated.” And you’ll nod your head and move on.

They’ll appeal to your ego, emphasizing how special you are, and how not many people can access this great investment. You’re going to feel like a VIP. You’ve been told that you are in an exclusive fund with a high likelihood of strong investment performance.

Because there is no public market for the investment, it is going to be valued infrequently, so you won’t see daily volatility in prices. This will also give you a false sense of calm.

Is it any wonder that the “multi-family office” world is full of these complex arrangements?

I generally prefer to access these investments through public markets—for example, you can easily invest in real estate, infrastructure, and even esoteric asset classes like litigation finance through fully liquid public vehicles. You can do so at a fraction of the cost, and—even better—many of these public companies are the actual management companies earning the fees that other investors are paying on those private funds you passed on.

An entrepreneur I know has a solid philosophy: if you like the asset class, invest in the managers, not in the funds. He has enough investible wealth that if he’s approached by an alternative asset fund and likes what he sees, he’ll offer to invest a significant sum… as long as they also give him the opportunity to acquire equity in the management company. He’d rather collect the fees than pay them.

The HNW Industrial Complex has created a marketing machine driven around a perception of exclusivity and buzzwords promising a level of service and attention they are often unable to deliver.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.