Investment Strategies

INTERVIEW: Industry Trends Through The Eyes Of TIGER 21

Eliane Chavagnon Editor - Family Wealth Report May 18, 2015

INTERVIEW: Industry Trends Through The Eyes Of TIGER 21

A catch-up with the founder of the peer network for wealthy investors, thinking about industry trends and how the organization has grown.

Family Wealth Report has long followed the movements of the North America-based peer-to-peer network of wealthy investors TIGER 21 – an acronym for The Investment Group for Enhanced Results in the 21st Century.

The rationale behind its launch around 16 years ago was to boost investors' investment acumen through critique and coaching, as well as to explore issues of wealth preservation, estate planning and family dynamics – in a safe environment.

TIGER 21's 320 members collectively manage $85 billion in assets, of which $55 billion represents money they manage for others and $30 billion their own net worth. Members include entrepreneurs, CEOs, inventors and other executives with strong backgrounds in financial services, real estate, industrial and consumer goods, legal services, entertainment and medicine.

In the past two years, the organization has launched new groups in Austin, Atlanta, Boston, Chicago, Palm Beach and Seattle, and added a second group in Miami and Washington DC. These added to its existing network in Dallas, Los Angeles, New York, San Diego and San Francisco, along with Canadian groups in Calgary, Montreal, Toronto and Vancouver. And a Houston, TX, group is in the works for later this year, says the organization's founder and chairman, Michael Sonnenfeldt.

Family Wealth Report spoke to Sonnenfeldt about how the organization has evolved in recent years as well as industry trends that have transpired in conversation among its elite member base, and how changing member demographics reflect shifts in investor mentality.

The evolution of TIGER 21

What TIGER 21 describes as its core program is the monthly group meeting of around 12-15 peers, as each member belongs to a particular group (such as Los Angeles 1, New York 3, etc.). Central to these meetings are the topics of wealth management, wealth preservation and the impact of wealth on identity, family, children and philanthropy.

Then around six years ago, the organization held its inaugural annual conference, uniting members from across North America. The most recent one took place in February in Palm Beach, FL, with the next one set for February 2016 in Beverly Hills, CA. These are members-only events that attract around 600 people overall, with speakers representing not just the world of finance but various industries such as health, science and technology. The idea is to give delegates a flavor of the landscape of the sectors they are invested in, or are thinking of investing in, and how these might be affected by global events.

In its latest endeavor, last month TIGER 21 launched the “third layer” of its network – forums – to bring together subsets of members with very specific, deep interests – master limited partnerships (MPLs) being one example of a current trend. Sonnenfeldt estimates that, across TIGER 21's membership base, somewhere between 3 and 5 per cent of assets are allocated to MLPs.

“Because it's a bit arcane in the sense that it's not a large market and a lot of people don't really know about it, the fact that somewhere between 30 and 50 of our members have investments in this area is a perfect opportunity to gather members from across North America for a two-day conference and invite some of the world's leading investment professionals in the space,” he said.

Member demographics

The average age of a TIGER 21 member is 55-57, with the range spanning from as young as 32 up to 85. In terms of net worth, the average member has around $100 million, but with a total member base range of between $10 million and $1 billion. Around two-thirds have already had a liquidity event, while around 30 per cent are still actively managing portfolios. This means that those who are not necessarily in a growth phase, but who are thinking more about wealth preservation, can interact with those who are on the “front line,” so to speak.

“In the past, people had a sense that, when you sell your business, you would typically think about 'retirement' in a sense that assets could take care of themselves,” Sonnenfeldt said. “But we actually have very few retired people by that conventional definition and one of the reasons for that is because our membership has gotten younger and younger. People who have created significant wealth earlier in their career are still looking to be active either in starting the next business or at least by being actively involved in another.”

He added: “Most of our members are still excited to learn about the financial markets and are seeking a perspective on what it means to preserve wealth in today's challenging environment, which is fraught with risks that people can't quantify.”

As a reflection of this, Sonnenfeldt noted that over the last decade the private equity allocation of TIGER 21 members' portfolios has grown from about 10 per cent to 20 per cent – representing the largest shift in allocation.

“What this largely means is that our members – to the extent that they want to continue creating wealth – are doing things that they're familiar with. Most created their wealth through a private company, so it's not surprising that they want to make sure they have some aspect of their portfolio continuing to grow in value in a way they can identify and get involved with.”

Wealth impact

Moving on to discuss some of the “softer” elements of wealth management, Sonnenfeldt said he has observed that one of the biggest issues that members want to talk about today is the impact of wealth on their children, particularly as it pertains to family relationships between generation one and two.

“When you're the wealth creator, the driver of your identity and personality is largely the satisfaction and pride that you get from having created something from nothing. The fear is that you have no way to give that to your child because they won't be starting with nothing.”

After that comes philanthropy and how to define the responsibility of their wealth, he explained. “Is it for the preservation of their own family? When is it time to give back, and when can people make a difference? So you have this transition from working and focus to meaning,” he said. “There is no question that most of our members appreciate that their good fortune, while certainly a reflection of their own hard work, is also a reflection of luck, and sometimes of an environment that gave them some advantage.”

So they start thinking about making that advantage available to others, to preserve the capacity to create wealth, he said. “A deep concern among our members is whether the environment in which they were able to create their own wealth is available to today's generation.”

In some sense, all TIGER 21 members are lottery winners Sonnenfeldt said, because, for every one who is incredibly bright, there are thousands of just as bright people who have worked just as hard but who weren't as successful. “It is very hard to have a perspective of 'why was I successful – was it luck or something else?',” he said.

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