Alternative Access - January 2020
THE US SHOULD DISENGAGE FROM NATO
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A Significant Trend There are other challenges to seeking investors for a family PE fund, including potential additional disclosure, reporting, and other requirements regulated by the Securities and Exchange Commission. This means that wealthy families accustomed to private trusts and similar arrangements risk public scrutiny of what they have long considered private matters. Still, Ryan Harris, a partner with Kirkland & Ellis, reports there has been “a significant trend in the last 12–24 months in families inquiring about these vehicles and starting to implement them.” According to Mr. Harris, part of the driver is that larger PE firms and other institutional investors are now offering longer hold periods, mitigating what has been a traditional differentiator for wealthy family PE funds and private offices. In response, a family fund leveraging third-party capital can be competitive on larger transactions but also focus on founder deals in industries where they have actual operating experience and offer flexibility and creativity in how the deal is structured. Either way, the trend of family PE groups matching the sophistication and resources of traditional firms is gaining momentum and has the potential to disrupt that model. “The old days of families passing the hat is not a sustainable model in today’s market,” says Paul Carbone, president and managing partner of Pritzker Private Capital. “Families are deploying capital directly and using a more innovative approach that reflects a need for speed, flexible capital to write a bigger check, and a professional team to go toe-to-toe with other firms. We see more and more families taking this approach.”
By David K. Lifschultz CEO of Genoil, Inc. and the Lifschultz Organization of New York City, founded in 1899.
Russia to build them up against China as Germany was built up against Russia. The 1972 alliance of the U.S. and China against Russia, and the later death of Mao, led to the U.S. pushing China up at the expense of Japan who was forced to shift to fiscal deficits rather than currency rigging to maintain their economy. Trump’s grand strategy is as follows: He wants to build up Russia as a balance against the EU and China and that the United States should withdraw their armed forces from Asia and Europe while these powers balance between themselves. Hence, we would have a strong Europe, a strong China, and a strong Russia, and Trump would like everyone to be friends. The U.S. as England in the past would be the grand sea power that could aid that balance. The error of England was that it involved itself in land wars in Europe quite unnecessarily as to quote Lord Halifax in 1694: “Englishmen, look to your moat.” England self-destructed. Today land wars are taking the form of trade wars based on currency rigging as what appears to be a carpet- bombed Detroit. In the above plan, the U.S. pulls our troops out of all overseas commitments, except those dealing with sourcing vital natural resources only required for the U.S. economy, and lets the currencies float against each other by ending dirty floating and eliminating the balance of payments deficit of $621 billion and the net deficit investment position over $10.6 trillion. We can cut our military by 75% in manpower and substantially increase salaries on the balance to hire technologically sophisticated recruits that can handle modern weapons.
LETTER TO THE EDITOR OF THE FINANCIAL TIMES
Dear Editor:
I address two articles opposite the editorial page dated Oct. 30 by Martin Wolf on the fate of Japan and Robert Zoellick who writes that President Trump’s policies are unplanned and erratic. There were three main planks to the Trump election campaign which were to end illegal immigration, which was undermining the wages of the lower classes in the United States; stop currency rigging that had been going on since the end of World War II, which created the huge U.S. rust belt; and renew detente with the Russians to avoid an accidental nuclear war. The Japanese and Germans rigged their currency with the approval of the U.S. after Mao took over China and allied with
Sincerely, David K. Lifschultz
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Steve Cohen to Buy 80% Stake in the New York Mets
Yet another corpulent billionaire is about to spend billions to own a franchise sports club just so he can avoid spending billions in taxes. According to FOX Sports reporter Ken Rosenthal, Fred Wilpon’s Sterling Partners, the owners of the New York Mets, is in talks to sell up to 80% of the MLB team to billionaire Steve Cohen, who is already an investor in the club.
and sports business analysts familiar with the financial aspects of team ownership.
The same logic would apply to Cohen and the Mets.
Buying a team isn’t like buying a factory full of machines; Cohen gets few physical assets for his $2.6 billion. Instead, he pays top dollar to join a successful league and acquire the rights to a star-studded roster. The IRS offers specific tax breaks to any business loaded with such intangible assets. So, in addition to taking a normal deduction, Ballmer could claim his team is worth additional millions in terms of selling tickets and driving broadcast revenue. This added value, he could say, was part of the original purchase price. The IRS would then allow him to amortize a significant portion of the $2.6 billion over a number of years in much the same way a factory owner depreciates aging machinery. It is hard to pinpoint how much Cohen — or the Mets owners — would benefit because of the tax code’s highly interpretive nature. Regardless, sports business analysts and accountants say owners can seek tax benefits equal to about half of the purchase price. In short, in a time when the “top 1%” are being hounded for their increasingly more original tax-avoidance schemes, one of the world’s most prominent billionaires is about to do just that.
The transaction, which was confirmed by the club, would value the team at $2.6 billion, according to Bloomberg.
According to the proposed deal, real estate developer and billionaire Fred Wilpon, the team’s current owner, will remain in his role for at least five years, at which time Cohen will have a path to controlling the franchise. Jeff Wilpon, his son, will remain as the team’s chief operating officer for the five- year period.
Meanwhile, Cohen, whose net worth is around $9.2 billion, will remain as chief executive of Point72 Asset Management.
Fred Wilpon is making the move as part of estate and philanthropic planning. The Wilpons will retain a stake in the franchise they assumed control of in 2002, Bloomberg noted. So, what’s in it for Cohen, who may have an ice rink in his Connecticut house but has not indicated any interest in baseball so far? The answer is simple, and the same as why Steve Ballmer bought the LA Clippers for $2 billion several years ago: tax benefits. In the Clippers case, Ballmer could seek as much as half of the purchase price of the team in tax benefits over the next 15 years, according to accountants
From Zero Hedge, 12/04/2019
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WEALTHY FAMI L I ES US ING 600-YEAR- OLD PLAN TO D I SRUPT PE
By Elis Baufis, Featured on Forbes.com
Pritzker Private Capital recently gathered family office investors in Aspen, Colorado, to look at how wealthy families are upping their game to compete for quality deal flow in a hot private equity market. The conference highlights a growing trend among wealthy families to establish hybrid private equity (PE) vehicles that raise third-party capital in order to match the breadth and sophistication of traditional private equity firms, while still leveraging the connections and other competitive strengths typical of family investors. New Strategy, Old Roots The movement by wealthy families to make direct investments in companies is a reprisal of a 600-year-old practice that started with “the Medicis and other grand families of Europe,” according to John Rompon, a family office private investor and managing partner of Marjo Investments, LLC. “After the Great Recession, wealthy families began to make direct investments at a quicker pace,” he says, adding that only about 15% of family investors “have demonstrated the ability to consistently make and manage large investments professionally. According to Mr. Rompon, the arrangement provides necessary capital for lead families to use less debt, acquire larger companies, retain companies over longer periods, and hire top-tier investment teams. “Even billionaires start to run out of money if they continue to buy companies but less frequently sell them,” he says.
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