The Benefit of NOT Being a Billionaire

There aren’t many who can remember the song ‘Who wants to be a millionaire?’ from the 1956 film High Society sung by Frank Sinatra and the lesser known Celeste Holm – (my mother told me about it) but the answer to their rhetorical question was ‘I don’t!’ Moving sixty years on and add in a chunk of inflation and our most recent memory of a potential monetary aspiration is probably ‘Billionaire’ released in 2010 by Travie McCoy and Bruno Mars and for those not familiar with their work, they wanted to be one ‘so fr***ing bad.’ Aspirations and amounts change but not being a billionaire has its merits – certainly from an investing standpoint.
Good Causes
Many billionaires and multi-millionaires seek to disperse much of their fortunes through philanthropy to good causes which is laudable. I’m not saying that it’s the problem of identifying the best investment choices for that amount of money that motivates a giveaway choice, clearly it’s the desire to help vulnerable people and those less well-off. However investing large pots of money isn’t easy for individual investors, so they often opt to invest with or are targeted by larger asset managers to ‘ease’ the process but in many respects that only compounds the problem.
Too Big?
Consider the local government pension scheme with several billions to invest. Due to its multi-billion size it is prevented from accessing many of the more rewarding investment opportunities that are often limited in capacity. Or if it does decide to invest a small amount, the impact on the total pension scheme’s performance is negligible. Consider one of the largest pension schemes in the world, the California Public Employees’ Retirement System’s (CalPers) exit from hedge fund strategies last year, it wasn’t due to poor performance or cost. It was that the impact of the hedge funds on overall performance was negligible.
The large pension scheme needs to find an investment manager who can deliver a scalable investment solution. As we have noted before, those larger asset managers are frequently quoted or listed companies with shareholders to satisfy – quarterly.
Do shareholders rank above investors at those organisations? Possibly but in order to satisfy the investment requirements of large investors, large asset managers need breadth of expertise which costs and prompts the need for substantial inflows to pay for those resources.  Clearly as we have noted before, there is an implicit link between performance and the ability to retain and grow assets but we feel those not blighted with having billions should not be hamstrung by the problems of investing alongside those with too much money.  As we’ve said before – Size Matters!  Yet ‘smaller’ investors with a few million and less feel the need of a name they might see on a London taxi for familiarity to invest with.  But familiarity can breed…
Surely for those with less than a billion and after philanthropic deeds a few million or less or those with a £1,000 to invest might consider a well-regulated active manager with the proven ability to deliver consistent outcome-focused returns with a relevant yardstick like inflation.
So in contrast to the songs referenced in the opening paragraph, ‘who wants to be a millionaire? I might. ‘Who wants to be a billionaire? Only if I give much of it to worthy causes. In any case, I’ll be investing to beat inflation with like-minded investors who can access the full opportunity set.

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