Wealthy Families Are Trying to Invest Like Warren Buffett by Making Private Equity Deals Themselves

Rich people are just making private equity deals themselves rather than bothering to go through private equity funds. Bloomberg reported: “Wealthy families are embracing their inner Warren Buffett, albeit on a smaller scale. They used to hand most of their assets to managers to invest. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees.” In investing, fee does matter. By directly buying a stake in a company, families can avoid paying fees to private equity firms, which typically charge a 2 percent annual management fee while keeping 20 percent of profits. “After a decade of direct investing we found that we actually saved millions, which were reinvested in companies and assets — huge, huge savings,” said Chad Hagan, whose family built its wealth in private health-care and financial businesses. (bloomberg.com)