Gates Divorce Focuses on Image Guardian
For nearly three decades, Michael Larson has stirred one of the world’s greatest fortunes with one main priority: keeping his fabulously wealthy bosses out of the headlines.
The conservative investments, the indescribable office, the generic sounding name of Cascade Investment – they have all been carefully crafted to shield Bill Gates and Melinda French Gates from criticism and produce stable, if seemingly unimpressive, returns.
The announcement of the couple’s divorce last month has cracked the organized image. Unflattering details have been leaked, including a report that Larson, the mastermind behind Cascade Investment, has harassed and intimidated some employees.
But despite rumors of betrayal and acrimony, one thing in Gates’ universe remains remarkably low-drama: the actual management of their fortune. The sprawling portfolio under Larson’s jurisdiction, estimated by Bloomberg News to be around $ 170 billion, has over the years generated returns above the broader stock market by about a percentage point, according to financial documents and reports. people familiar with the subject.
The brief illustrates the priorities of the highest strata of the ultra-rich, where investment horizons span generations and the riskiest bets often don’t outweigh the value of a good reputation. Part of Larson’s job was to help Bill Gates defend his image as a wacky billionaire dedicated to solving global challenges, rather than taking bold action that might attract attention.
“The price some of these guys are willing to pay for staying out of the news is high,” said Tayyab Mohamed, co-founder of family office recruiting firm Agreus Group.
The divorce and recent revelations about Cascade’s workplace culture, reported by The New York Times, raise questions about the future of Larson, who has overseen the vast majority of the Gates’ personal wealth through Cascade and the Endowment Bill and Melinda Gates $ 51 billion. Foundation.
French Gates, in particular, has been the center of attention after Cascade transferred over $ 3 billion worth of stakes to her, leading some in the industry to speculate she was in. claiming even greater control over his share of the wealth.
Larson, 61, admitted in response to the Times report that he sometimes used harsh language, but denied mistreating employees. A spokesperson for Cascade, which employs more than 100 people, said the cases had been reviewed and did not warrant his dismissal. A representative for Gates did not respond to a request for comment.
Mohamed said it was not surprising that Larson stayed in his role after the allegations, given his decades-long tenure with Gates and the loyalty he likely engendered.
“If Larson hadn’t had the professional impact he has had, it would be a simple yes he should step down,” said Mohamed, whose company helps family offices fill leadership positions.
Larson, often dressed in a pink shirt, shuns the spotlight and rarely attends conferences for family office professionals. A former bond fund manager, he was hired by Bill Gates in the mid-1990s and earned the billionaire’s loyalty by delivering consistent returns and instilling in employees the idea that their main goal was to protect the reputation of their benefactor. , according to people familiar with Cascade, who asked not to be named when speaking about the inner workings of the company.
The manager had a lot of leeway over Gates on investment decisions, they both said. French Gates rarely attended meetings at the start of Cascade outside of the annual in-person meeting, and when she did, she tended to be a passive participant, according to one of the people familiar with the company.
She was unaware of most of the allegations involving Larson “given her lack of ownership and control over BMGI,” spokeswoman Courtney Wade said in a statement, using the abbreviation of Bill and Melinda. Gates Investments, the parent company of Cascade. BMGI also manages the endowment of the foundation, of which the Gates are both listed as trustees.
It’s unclear where French Gates keeps her money, including the more than $ 3 billion that has been transferred from Cascade, and whether she is setting up her own family office. She also runs Pivotal Ventures, an investment and incubation company founded in 2015 that focuses on gender and racial equality and employs around 90 people.
Being the chief investment officer for one of the world’s largest family fortunes can seem like an enviable job for an investor thinking about creative bets. Fundraising, customer withdrawals, or onerous regulations are virtually no problem. But it’s often more about keeping wealth stable.
In addition to distracting the Gates’ attention, Larson’s main tenure has been to invest conservatively – trying to maximize returns but not lose money, one of the people said.
This reflects the investment approaches typical of large family businesses and foundations, said Raphael Amit, professor of management at the Wharton School at the University of Pennsylvania.
“Goal # 1 is preservation of capital,” he said, adding that this is why family office portfolios are so diverse, comprising not only public stocks but also fixed income securities. , raw materials and assets such as art.
In a Fortune article from two decades ago, Larson explained that much of his strategy comes down to countering fluctuations in Microsoft stocks. At the time, the Gates’ foundation and personal money portfolios consisted primarily of bonds, with some investments in private equity, commodities, Florida real estate, and British hotels.
This has changed. Today, Cascade owns approximately $ 57 billion in public shares, ranging from farm equipment maker Deere & Co. to railroad operator Canadian National Railway Co. to waste management company Republic Services Inc. – businesses that make, move and sell goods and clean things. up.
Cascade does not disclose its overall investment performance, but the foundation’s financial reports do offer clues. The foundation’s assets under management have averaged around 8.6% per year since 2001, according to a person familiar with the matter, beating the S&P 500 Index’s average annual gain of 7.5% over the past two decades. . This balance sheet is broadly representative of Cascade’s overall performance, another person said.