MANAGE TAX ALPHA

“The flat fee arrangement means that people do not invest in building out these alternative teams. There's a lot of work, it's a lot of effort, it's a lot of expense. If you make the same 40, 50, 60 bips doing that or just buying stocks and bonds, you're going to buy stocks and bonds. So by and large, that industry I think is not teed up for a sophisticated portfolio.”

“I'll see someone with their very first liquidity. They take it, and instead of doing something a little bit safe, in case there's a rainy day, they turn around, and you go put in a bunch of very early stage startups. You just sort of sit there, and you're like, listen, if you're going to do venture, at least try to do it in a systematic way. Do not take 80% of what you just got, and hand it to your three friends.”

“Sure, part of their strategy should be to diversify, but part of it should be to hold on to that stock long-term and think about how to maybe even monetize the volatility. So we've built some options programs and things like that for people here to monetize these stocks are volatile by nature. And so you can monetize that volatility without necessarily exerting the stocks.”

“And if you're an individual, you're paying, especially in this state, you're paying 50 plus percent tax. So the easiest alpha to use an investment term to get is a tax alpha. And they are not these institutional asset managers because most of their clients are non-taxable. They're not even attempting to optimize after-tax return.”

“Banks themselves don't train people to be professional investors. These people are trained to be service providers. They're trained to be responsive, helpful. But actual investment acumen, when you're at a large bank, sits in a separate group. You're rewarded as a wealth manager by how much you grow your book of business. You're never trained to be an investment person, per se.”

“The other challenge I found is that family offices have real trouble retaining the talent because, you know, you hire someone, they're ambitious, they have a career path. The principle of the family is signing up really to be a manager of an asset management company. I don't think many of them actually realize that's what they're signing up for. And I don't think they want to do that.”

“And professional investor is a very specific definition in my mind. It's someone who at some point in their career was paid purely based on the performance of their investments, right? Your investments were up 20% this year. Here's your money. Thank you very much, right? If you have those kinds of people on your team, you now can underwrite your investments yourself.”

“The entire banking system and taxation system was built around real assets. When banks and law and all these laws were built in the 20s, 30s, 40s, all there was was real assets, right? People weren't, there were no internet companies, they were buying buildings, factories. So the tax code is very beneficial to real assets. And you can therefore get a solid teens return.”