The investment secrets of Australia's billionaires

There seems to be no stopping Australia's ultra-wealthy, with the number of billionaires down under growing by 14.4% over the past 12 months, to a record 159 people. For some context, in 2020, this number was 117, according to The Australian. 

While it's wonderful to daydream about what you would buy or do with a few billion dollars, the true secret success of the ultra-wealthy is their ability to stay that way. After all, how many stories have you read of lottery winners squandering their newfound wealth just a few short years later? 

So, how do the other half continue to grow their wealth? The answer, my friend, is investing. 

While I am told that there's definitely a superyacht or two on the menu, Australia's ultra-wealthy invest like the rest of us - in passive and active products. 

However, most are searching for differentiated strategies that can deliver significant alpha over the long term, rather than taking a punt on the next hot stock, for example. 

According to the Chief Investment Officer of the private family office MRB House, Peter Magee, Australia's ultra-wealthy are looking for concentrated funds (of around 15 stocks), portfolio managers who have most (if not all) of their wealth invested in their funds, with some level of constraint around the amount of money they manage - and who stick to their strategy no matter the latest fad, theme or stage in the market cycle. 

Australia's ultra-wealthy are heavily invested in global and local equities, alternatives, private market funds (like those invested in venture capital, private equity and private credit), and an increasing number are focused on climate and/or impact funds, according to Louise Walsh, the CEO and founder of capital raising business Walsh Capital. 

Interestingly, fixed income and emerging markets are far less alluring, at least to Magee. Fixed income, he argues, isn't tax favourable and the returns are not attractive enough over the long term. Meanwhile, investments in emerging markets are far more likely to face sovereign risk. Plus, history shows that investors in the US and Australian equity markets have been handsomely rewarded. 

To learn more, I sat down with Magee and Walsh for their insights into how Australia's ultra-wealthy invest as part of Livewire's Undiscovered Funds Series. 

They share their tips and tricks for identifying "exceptional" funds, outline the factors that are important to their processes, share what to do when a fund isn't performing as expected, and name one recently launched fund that has impressed in recent years. 

Note: This interview was recorded on Wednesday 15 May 2024. 

Other ways to listen: 

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TIMECODES

• 0:00 - Intro 
• 0:40 - Do the ultra-wealthy invest like the rest of us
• 1:44 - Where are the ultra-wealthy looking to allocate
• 3:41 - The areas of the market MRB House avoids: Emerging markets 
• 5:35 - Where active management can add the most value...
• 6:59 - ... And it's not in fixed income 
• 7:24 - The criteria Louise Walsh uses when selecting funds to work with 
• 9:49 - Red flags to look out for 
• 11:37 - Peter Magee's tried and tested process for selecting excellent funds 
• 14:10 - Past performance IS a reliable indicator of future performance 
• 14:57 - The importance of differentiation 
• 16:34 - The number of funds the ultra-wealthy invest in...
• 17:47 - ... And what to do when one isn't performing as expected 
• 19:56 - A new fund that is held by the ultra-wealthy and why this is