The Real Deal New York

Do it yourself: The wealthy are increasingly looking to invest directly

The rich are looking to follow the family office model championed by billionaire families
September 23, 2018 10:00AM

(Credit: Pixabay)

Billionaire families like the Dells and the Pritzkers know that the smart way to put their money to work is by investing directly. And now your average centimillionaire is catching on.

Instead of going through hedge funds, private equity and other traditional investment platforms, rich people are increasingly looking to “go direct” by investing their money straight into a business, Bloomberg News reported.

“Some wealthy people don’t like being in investment pools where they don’t have a say,” explained Cascadia Capital managing director Felix Herlihy. “The thinking is by going direct their performance over time will be superior. In a way, it’s saying, ‘I’m a little bit smarter.’”

Some investors are looking to get an early look at deals that haven’t already been picked over.

“There’s a ton of money out there still waiting to be deployed,” said Michael Tiedemann, chief executive officer of Tiedemann Wealth Management. “If the deal has reached your desk, and it is not an industry that you were an operator in, chances are it has been looked over and passed on by those who know much more about the competitive landscape than you.”

At a gathering in the Hamptons last month, a group of roughly 630 individuals with at least $10 million to invest known as Tiger 21 were discussing going direct, or do-it-yourself investing.

Tiger 21 investors increased their exposure to alternative investments like private equity, which accounted for 23 percent of their investments in the second quarter, according to CNBC. That was up from 21 percent in the previous quarter.

But at the same time they’ve scaled back investments in assets like real estate, thanks to concerns over the “retailpocalypse,” rising interest rates and falling real estate prices.

Real estate accounted for 30 percent of their portfolio in the first quarter of the year, but by the second quarter it had fallen to 27 percent, according to CNBC. [Bloomberg, CNBC] – Rich Bockmann