Table of Contents
Part One: The Importance of Private Capital
Capitalism and Its Contradictions
Conclusion: American Distinctiveness and Private Wealth
A (Brief) Moral History of Capitalism
Moral Arguments for Capitalism
Higher Education: The Case of St. John's College
Politics: The Conservative Resurgence
New Business Ideas: Venture Capital in America
Creative Capital and Vibrant Societies
Why Do Creative Capitalists Persist?
Conclusion: Underdogs and Bullies
Part Two: The Stewardship of Wealth
Chapter 3: Are We Living in a Permanent Financial Crisis?
The Cause of the Crisis Matters
The Industrial Revolution and Its Aftermath
The Great (and Strange) Experiment
Seize the Means of Production!
The Power to Tax Is the Power to Destroy—Societies
“Borrowing … the Disease Is Incurable”
But, First, a Note about Germany
Investing Capital in a (Very) Uncertain World
The Law of Supply and Demand (Again)
Idiosyncratic Ideas about Risk
Real Risks: Those Embedded in the Process of Investing
Behavioral Finance: Are We Hard-Wired for Failure?
Edith and the Headwinds She Faces
Conclusion: Preserving Wealth Is Hard Slogging
Chapter 5: The Collapse of Ethical Behavior
An Unsavory Rehash of the Ethical Failures
Conclusion: Fixing the Industry
Chapter 6: Finding the Right Advisor
Open Architecture as a Disruptive Business Model in the Advisory World
Finding the Right Advisor for Your Family
Conclusion: Focusing On a Few Key Variables
Chapter 7: Making Family Investment Decisions
The Family Investment Committee Today
Attempts to Deal with the Problem
The Family Investment Committee, Tomorrow
Opportunity Costs: Prudence versus Returns
Conclusion: Focusing On What Families Do Best
Down with the Bundled Trust! Up with the Open-Architecture Trust!
Conclusion: Let's Get Revolutionary
Part Three: The Rich Get Richer
Chapter 9: Designing Taxable Investment Portfolios
Problems with Mean Variance Optimization
Best Practices in Designing Investment Portfolios for Families
Traditional Asset Allocation Modeling
Modern Asset Allocation Modeling
Satisfying Portfolio Claims Prudently
Conclusion: Art versus Science
Chapter 10: Adding Value to Family Investment Portfolios
Moving from the Current Strategy to the New Strategy
Adding Value through Manager Selection
Adding Value by Tactically Repositioning the Portfolio
Adding Value through Opportunistic Investments
Adding Value through Monitoring and Rebalancing
Conclusion: We Need All The Value-Add We Can Get
Chapter 11: Investing in U.S. and Non-U.S. Equities
U.S. Large- and Mid-Capitalization Stocks
U.S. Small-Capitalization Stocks
International Developed Country Stocks
Conclusion: Equity Securities Are At the Core of Most Portfolios
Chapter 12: Investing Globally
Global Investing in the Real World (or, Maybe, Real Investing in a Global World)
Conclusion: Think Globally, Act Locally
Chapter 13: Investing in Real Assets
Conclusion: The Use and Misuse of Real Asset Exposure
Chapter 14: Investing in Fixed Income
Employing Best Practices in Building Bond Portfolios
Conclusion: Fixed Income Is Underappreciated
Chapter 15: Investing in Hedge Funds
Challenges for Hedge Fund Investors
Building a First-Rate Hedge Fund Portfolio
Conclusion: Should Anyone but Yale Invest in Hedge Funds?
Chapter 16: Investing in Private Equity
The Importance of Diversification
The Return Characteristics of PE Investments
Gaining Exposure to Private Equity
Illiquidity and the J-Curve Effect
Ramping Up to Your Target Allocation
The Evolution of Secondary Investing
Secondary Investing Strategies
Identifying High-Quality Secondary Funds
Conclusion: The Ultimate Aspirational Asset
Chapter 17: Working with Money Managers
The Business of Money Management
Conclusion: At Least Managers Are Interesting
Chapter 18: Managing Investment-Related Taxes
Designing Portfolios from an After-Tax Perspective
Conclusion: You Can't Eat Gross Returns
Chapter 19: Asset Location and Implementation
Conclusion: It's Not Just a Technical Issue
Chapter 20: Monitoring and Rebalancing Taxable Portfolios
Rebalancing Taxable Portfolios
Conclusion: Monitoring and Rebalancing Are Stewardship Issues
Chapter 21: Investment Policy Statements
The Investment Policy Statement
The Investment Committee Policy Manual
Conclusion: Don't Skimp on Documenting Your Decisionmaking
Chapter 22: Miscellaneous Challenges for Private Investors
Concentrated Security Positions
Family Investment Partnerships
Conclusion: There Are Challenges Everywhere We Look
The Real Way the Rich Are Different