The Ledger
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Del Buono: Most tech-focused RIAs have at most one or two professional investors
“So a lot of these firms do not have professional investors. So I often ask people as a quiz how many professional investors do you think are in, you know, RIA XYZ? And people will answer, I mean, percent, right? People answer me, 20%, 50%, 30%, but the number …”
Del Buono: Most Secondary Volume Flows Through Questionable SPVs
“The vast majority of the volume goes through these sort of questionable SPDs”
Del Buono: AI Startup Check Sizes Make Fund Scale Essential in Venture
“All asset management industries have some scale benefits to them. Venture traditionally had less and now has a lot. So if you're going to back a new AI startup, you can't show up with a million dollar check or two million dollar check that it's useless or let …”
Del Buono: Putting initial founder liquidity into friends' startups almost always fails
“I'll see someone with their very first liquidity, the very, 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 they go put it in a bunch of like very early stage startups.
Often…”
Attorneys and CPAs ignore tax-loss strategies that rival complex trust structures
“Where I find that people have difficulty is you hire attorneys, right, and they're going to tell you everything about, or CPAs, about these trusts, but they're not going to have the knowledge
To compare that and contrast that to an investment strategy that gen…”
Wealth managers push diversification strictly to earn fees on founder stock
“Wealth managers, asset managers, It's very self-serving for them to say, hey, you should liquidate everything because obviously they can't, they're not going to charge you fees on your concentrate position. It's your stock. You brought it to the table, but the…”
Winning concentrated startup stock usually continues to perform well post-liquidity
“History has shown that hanging onto your stock Generally speaking, not always. There are counter examples, of course, to everything. Generally, you know, that stock that got you to the liquidity point will probably continue to do pretty well.”
Del Buono: Most founders should keep company stock while actively engaged
“But I'd say the vast majority of people should keep it for a while at least as long as they're engaged in the company, right?”
Nested L2 and L3 SPVs introduce severe, compounding counterparty risk
“So you see things L one, L two, you even see L three nested structures each time you're further and further away from the stock. And so there's more and more risks that you don't get, You know, what you thought you would, right? Because who's to say that the o…”
Del Buono: Young investors can hold up to 100% alternative assets
“If it's for a very young person, it's okay to have 80, 9000% alternatives, because they don't need the cash immediately. So let the stuff grow, you know, at the highest risk possible.”
Retail private market funds risk massive fee leakage through layered SPVs
“You just have to look at the underlying pieces and understand them, except that there's the additional complexity. How did they get this thing? Is it through an SPV? Is it through an L two SPV? What did they pay for that? How much of the sort of return is goin…”
Real asset depreciation and basis step-up can completely shield generational taxes
“If structured properly, you can offset Almost all the income from the property. And then because of something called a step up in basis, a death when you sell that asset after you pass away, you don't owe tax on that either. So you, along the way, all the inco…”
Andreessen and Horowitz founded Perennial finding traditional wealth management underwhelming
“The principles here, Mark and Ben included had been served by more traditional wealth management firms. And they looked to the LPs of A-sixteen Z and saw, you know, the big sovereign wealth funds, the big pensions have very high end professional investment tea…”
Del Buono: Traditional Wealth Managers Are Trained Service Providers, Not Investors
“Most of these firms, the independent firms have spun out of banks and the banks themselves don't train people to be professional investors, right? These people are trained to be service providers. They're trained to be responsive. They're trained to be helpful…”
Del Buono: Wealth managers charge AUM fees for services because it is more profitable
“So these services, in my opinion, should be fee for service. But because that's of course less profitable than having an AUM based fee on someone's entire balance sheet you charge that fee, you go through the motions of the investment management, but you view …”
Del Buono: Portfolios with 50-70% alternatives incur 3-4% annual look-through fees
“50, 60, 70% alternatives. On a look through basis, your fees are going to be three or four percent a year. So it's a huge headwind. If you can get rid of some of that by having a professional team in house and not always just hiring third party managers that c…”
Del Buono: Single-family offices require billions to justify talent compensation
“If you're trying to build a multi-asset class portfolio, global multi-asset class portfolio, you're going to hire a bunch of these sort of professional investors I mentioned. I don't know, you need five, six, seven of them, different asset classes. You've got,…”
Del Buono: a16z Perennial buys liquidated assets from dissolved family offices
“When the patriarch or matriarch passes away, very often the family office falls apart. Either the investments are completely turned around and things are liquidated in a hurry that results in large losses. By the way, we're the beneficiaries of that. Sometimes…”
Del Buono: Custodian Firms Disable Self-Service Features Under RIA Platforms
“When you move under the RA platform, those features are disabled to sort of keep you more locked into that ecosystem.”
Del Buono: Wealth managers offer menus of options to deflect liability
“A lot of, again, firms will present you alternatives. They'll say you can do this, or you could do that. You tell me what you want. And they're doing this for various reasons. One, they may not actually have a strong opinion. Two it's liability. If I tell you …”
Del Buono: Founders can stack QSBS tax exemptions across multiple trusts
“So you can create several trusts. Each of those trusts gets the now fifteen million dollar exemption before it was 10. So you can do that. Married couples now can get both.”
Del Buono: Secondary SPV Managers Can Sell Stock Without Investor Approval
“I've seen personally in cases where the stocks that are in the entity are sold by the individual managing the entity. And they don't need to seek approval from the people who invest in it, right?”
Del Buono: Perennial Has Encountered Full-On Fraud in Secondary SPVs
“I've run into a full-on fraud before, but, you know, the first thing we do is we pay a background check company to see, again, using you as an example, does she actually work at SpaceX?”
Del Buono: AI CapEx boom shields leveraged private credit from near-term crisis
“And that, right now, there's no indication of a slowdown in the economy, really. There's a few, you know, there was a bit of a surprise on the employment report, but by and large, the economy's growing, you know, the long-term trend for growth is not even two …”
Del Buono: Family decisions, not trust mechanics, stall wealth planning
“If you don't have those basic things thought out, trying to structure the trust itself is not the difficult bit. It's these things you define inside a very difficult bit.”
Del Buono: Secondary SPVs frequently charge 1/10 or 2/20 fees at marked-up valuations
“The other thing, of course, is that people layer in a lot of fees, carry, so it's not unusual to see one in 10, two in 20 type structures, or a five percent transaction fee, and often it's not done at the last round. It's done a significant, you know, increase…”
Del Buono: In private investing, signed contracts override notions of fairness
“Whenever you're doing a private investment, the contract you know, you're sort of excluded from the regulatory oversight by saying that it's a special contract only for qualified people that don't, that meet certain income thresholds. So those contracts are cu…”
Del Buono: Semi-liquid evergreen funds can gate redemptions below five percent
“Some evergreen structures have what's called this sort of semi-liquid character, so that every quarter, the company that's running this structure will say, hey, if five percent of the total investors redeem, we'll meet that, but if it's more than that, we won'…”
Taxable investors can immediately depreciate 100% of data center capital expenditures
“The beauty of the recent tax changes is that for a taxable investor you have accelerated depreciation on data centers, so you can depreciate a hundred percent of your capex immediately and get a huge tax benefit. So there's some tailwinds to the sector because…”
UK expat tax reform triggered flight by exposing full global balance sheets
“In London though when they sort of got rid of the expat sort of benefits and a hundred percent of your wealth could come under the 40% inheritance tax they have in the UK, that caused the problem because the entire balance sheet of someone's life or worth woul…”
Del Buono: Standard Funds Skip Tax Structuring Due to Non-Taxable Clients
“A lot of the standard funds out there don't do the structuring because most of their clients are not taxable.”
Del Buono: Flat Fee RIA Structures Disincentivize Alternative Investment Strategies
“The flat fee arrangement You know, means that people do not invest in building out these alternative teams. It's a lot of work, it's a lot of effort, and it's a lot of expense. And if you make the same 40, 50, 60 bips doing that, or just buying stocks and bond…”
Del Buono: Institutional Asset Managers Do Not Optimize for After-Tax Returns
“Their pensions, endowments, foundations, sovereign wealth funds, all these people don't pay tax. So they are not at all focused on the taxable element. And if you're an individual you're paying, especially in this state you're paying 50 plus percent tax. So th…”
Del Buono: Single-family offices struggle to retain talent without founder involvement
“The principle of the family is signing up really to be a manager of an asset management company. That's really what they're signing up for. 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, …”
Del Buono: Tech employees can monetize volatility through options without selling stock
“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 s…”
Del Buono: Wealth Management Clients Rarely Switch Once Onboarded
“Once you've picked the person, The odds of them moving again are extremely low, right? And so that's where the, all the competition happens.”
Del Buono: Holding investments in fund vehicles enables tax-loss offsetting
“The way to use a loss is inside a fund vehicle that generates its own gains that can be offset by its own losses. Then you don't have to worry about extracting the losses and putting them on your personal balance sheet and not being a user.”
Del Buono: a16z Hires for Outsized Strengths, Not Lack of Flaws
“They said, we don't hire people for lack of flaws. We hire people for their sort of their skills.”
Del Buono: Post-exit founders completely leaving their companies is the exception
“A lot of founders, though I think want to stick with their company very, very long term.
They're not necessarily thinking, you know, two years out, I'm done.
they want to stay along.
I mean, this is their baby.
They know it.
They've grown it.
So it's not nece…”
Del Buono: Startups will only IPO once private capital dries up
“If there's like a slowdown in the economy and less excitement About these companies, that's when they're going to be maybe more forced to IPO because the private capital then won't be available.”
Del Buono: Private investing operates on a 2x2 matrix of access and diligence
“I think of private investing, there's like this two by two matrix, which is like, it's access and it's diligence.”
Del Buono: Pre-Liquidity Planning Rests on Trusts, Tax Investments, and Philanthropy
“So there's kind of three elements
To preparing yourself for a liquidity event, right?
Structuring your trust and estate, thinking about how to sort of make key investments that help offset taxes to some degree, and then donating into a donor advice fund or som…”
Del Buono: Donor-Advised Funds Separate Tax Timing From Philanthropic Decisions
“The beauty of the donor advised fund is that you can sort of detach your decision when to give with your decision of when to sort of tax optimize, right?
So you can donate things into a DAF and immediately get a tax benefit, but if you're young and still worki…”
Pre-IPO secondary SPVs take carry from the first dollar without hurdles
“And in some spaces, like in private equity, carry usually has a minimum return before the carry accrues to the person. So, you know, might have a six, seven, eight percent Return to the investor before the SPV owner gets the carry, but in these situations I've…”
Del Buono: Weak distributions affect all private asset classes, not just venture
“In the last few years, the distributors have been pretty weak from all private asset costs. It's not specific to venture.”
Del Buono: Clients are experiencing a 'fever' demanding direct private investments
“More and more people want access to these directs. They're clamoring for it. And they'll come and they'll say, oh, I've got these, you know, these six different things I'm looking at. What do you have? Let me compare across this. It's a complete fever around t…”