Episode summary
Andreessen Horowitz’s Family Office on Why Traditional Wealth Managers are Conflicted
How I Invest With David Weisburd
· · 36 min · Hosts: David Weisburd · Guests: Michel Del Buono
Summary
Michel Del Buono argues that wealth management and investment management are not the same business: the former often rewards relationships and asset gathering, while the latter requires real investment DNA, tax awareness, and the ability to implement customized portfolios. He says a16z Perennial was built to extend the venture firm’s founder support into personal finance, but also to correct the misalignment he sees in traditional family offices and wealth firms.
A major theme is scale. Del Buono says larger pools of capital can benefit LPs through better monitoring, reporting, negotiating power, and the infrastructure needed to run complex multi-asset portfolios. He also argues that some strategies are easier for taxable investors than institutions, because tax alpha can be more valuable than traditional alpha and the taxable investor is now a large marginal source of capital.
He repeatedly pushes back on conventional diversification dogma. For the right individual, a 90/10 portfolio can be rational if the risky sleeve is diversified and the safe sleeve covers lifestyle needs. But he says implementation matters: direct investing, third-party managers, liquidity planning, and psychology all shape outcomes. He views real estate, venture, and certain tax-aware hedge fund structures as useful tools when they are structured to preserve control, reduce fee drag, and improve after-tax returns.
Key takeaways
- Del Buono says traditional wealth managers are often service providers, not investors, and that creates a principal-agent problem in product and fee design.
- He argues scale helps LPs too, because it improves risk monitoring, reporting, terms, and access to better managers.
- He says taxable investors are now a major growth market, and that 100 to 500 basis points of tax alpha can be more important than investment alpha.
- He argues a 90/10 portfolio can make sense for an individual with a large balance sheet and a long horizon, even though it would be inappropriate for an endowment.
- He says the right structure can matter as much as the asset, especially in real estate and other tax-aware investments where control and fee drag drive after-tax results.
Notable quotes
“The first principle was to get rid of all these principal agent misalignments that are out there”
“I would argue that as an individual or even an endominer foundation when you're building your own thing you would like to do a blend”
“One of the big trends in alternatives is the rise of the taxable investor”
“The strategy is only as good as its implementation”
“One has been the realization that tax alpha is by far the easiest and best alpha to generate for individuals”
How the episode opens
Many of these firms will charge you a relationship fee, some sort of flat fee based on your AUM, 50 bips, 60 bips, no matter what you do. So, let me ask you, if you made the same money doing something quite easy and highly profitable or something very difficult and questionably profitable, which one would you pick? One of the big trends in alternatives is the rise of the taxable investor.
Why is that such a recent phenomenon? And why is asset management not focused on the taxable investor? quarter of the total assets in the US markets is taps.
Let's say you and I are running our own asset management firm and I told you, okay, we need a billion dollars to get to a reasonable level of profitability and I'm offering you two paths to get there. One is find 10 institutional investors at 100 million each. Or two, let's find a,000 people that will write a $1 million check.
And I don't even know where to go to find those. And if they do go through intermediaries like banks or eyes, they're fiercely guarding those clients. They're not going to sort of propose that those people invest in your fund.
You came from Jordan Park where you were CIO and Mark and Ben gave you this interesting thought experiment of how would you build a multif family office from scratch. What were your first So Michelle, you're the CIO of A16Z Perennial. We're here at Andre Horowitz built this massive venture capital firm. Why take the time and maybe the attention to build a family office?
Well, several reasons. I think reason number one is um a deep commitment to the founder community and and the idea that this firm helps founders in every dimension of their startup.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- family office
- wealth management incentives
- tax alpha
- concentrated portfolios
- investing psychology
Companies and tickers mentioned
- Andreessen Horowitz
- a16z Perennial
- Jordan Park
- Makena Capital Management
- Scion Capital
- McKinsey
- AlphaSense
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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