Tiger 21, more formally known as The Investment Group for Enhanced Results in the 21st Century, is in large regard a glorified investment club. It is an investment club with a $30 thousand annual membership fee. Collectively, the club’s 230 members control assets valued in excess of $20 billion and have a median net worth $75 million. I rather doubt anyone reading my Blog would qualify for membership. Yet the truly wealthy are worth studying in terms of how they invest and what it is that motivates them to take action. This is true because, as we have observed since the financial meltdown of 2008 – the rich indeed do get richer. The wealth of the rich has recovered while the middleclass in America continues to struggle.
To see where the rich are mentally at this point in time, we may observe in what classes they have invested their assets. In the case of the Tiger 21 membership, their composite holdings at the end of 2013 looked as follows:
- Private Equity 21%
- Public Equities 24%
- Fixed Income 14%
- Real Estate 21%
- Cash 11%
- Hedge Funds 8%
- Commodities 1%
Even with the S&P 500 up in excess of 30% last year, these rich investors had only 24% of their assets in the equity market. And now, with the market indices near record highs, they are fearful of increasing their exposure. They have seen the equity markets drop steeply before and they are more interested in preserving the wealth they have, as opposed to adding to it. When you get to a certain age, usually the late forties, individuals whom have accumulated a substantial net worth come to the realization that they have been successful, that luck played a role in it and that if they were to lose it all it is unlikely they could ever regain the wealth at this stage of life. They turn their efforts to wealth preservation; sure they want it to grow, but to grow conservatively.
The Tiger 21 group is comprised of entrepreneurs, CEOs, hedge-fund founders, entertainers and other professionals. Their ages range from the mid-30s to the eighties. They are smart, successful and work hard. They like investments where they may share their knowledge and skills to help a business prosper. This is why they favor private equity, which is an investment vehicle available to accredited investors (a minimum of $1 million in investable assets not including your home or $300 thousand in annual income on the past two years tax returns). With private equity deals, the investor often times plays a role in helping guide the acquired company to greater profitability offering the investor a hands on opportunity.
What can we learn from the Tiger 21 group? They have largely shunned the traditional investment advisory business in favor of having organized, facilitated investment strategy meetings with successful people like themselves. The group’s founder began the organization when following the sale of his business, he did not believe he was getting unbiased advice – everyone was trying to sell him. He figured there were other people like him and formed the group so that they might discover each other and work together teaching one another. This lesson was learned by most of us in school. When study groups are formed, the “A” students tend to group together and the “B” students and so forth. At exam time it’s really no surprise that the “A” study groups get the best scores. Tiger 21 is a group of over-achieving “A” students.
Average investors can’t duplicate their approach, but can learn from it. One lesson is learning to be aware of how much risk you are accepting in a portfolio of assets. If you are near retirement and have more than 60% of your money in equity mutual funds, you may want to step back and consider how your retirement plans would change if the funds were to drop by 40%.And keep some cash available. The 11% the Tiger 21 group has in cash is near historic lows since they were founded in 1999 and they are likely moving to increase that now. Having say 30% cash when the markets are making new highs will position you to take advantage of a major market decline – a bear market. This is something the average investor can control.
Most importantly, don’t go it alone. Hire an hourly paid financial planner who you can bounce ideas off of and who will help keep you on the right course.