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Is this the 21st century’s greatest investor?

We all know Bill Gates – he’s the world’s most famous billionaire. Gates more than anyone invented the computer age and now he’s the greatest philanthropist of his generation. Everyone knows who he is. 

But his investment skills have contributed less to his fame. To some, that might be a surprise because Gates has is numbered among a handful of the most skilled investors living today – if not the most skilled. 

Gates’ investments sometimes surface in unusual areas, particularly outside of the US

Maybe he likes it that way. As far as Gates is concerned, making money is probably just a means to an end – represented by the phenomenal philanthropic endeavours of the Bill & Melinda Gates Foundation.

In the investment world, however, he has shown as much skill as an investor, as a tech entrepreneur and philanthropist. In fact, the holdings linked to his investment companies and the Foundation probably make up the most valuable personal portfolio in the world – likely to be worth more than $100 billion. It stretches across multiple asset classes and various types of businesses – old economy, new economy, public/private companies, and commercial real estate. 

The public face of this activity is the Foundation, which has an endowment worth around $50 billion – that’s huge, more than the biggest university endowment in the world, Harvard. Its influence is seismic – and well documented. 

Less well documented is the investment machine which sits alongside the Foundation – although the two are often blurred. Most in the world of finance have heard of Gates’ holding/investment group, Cascade Investment, and its legendary managing director/CIO, Michael Larson. Because of US Securities and Exchange filing rules, the public can get a pretty good idea of Cascade’s biggest holdings. But that is about it when it comes to public knowledge. 

Based in a nondescript building overlooking Lake Washington in the Seattle suburb of Kirkland, Cascade doesn’t give away its secrets. It has no website, and few of its staff have social media profiles, at least in a capacity that links them with Cascade. Its staff numbers aren’t known, nor if it has any offices, or even representatives, elsewhere. 

Contrast that with another US tech billionaire, Michael Dell, whose family investment group, MSD Capital, is upfront with its profile. Housed in a swanky skyscraper in Fifth Avenue, New York City, MSD has an informative website, with profiles of senior staff members, and some information about its investment philosophy. Although far from being overly transparent, MSD is at the opposite end of the transparency spectrum to Cascade. Family Capital approached the Foundation for comment on Gates’ investment strategy, but none was forthcoming at the time of publishing the article.

Cascade’s publicly known investments include a lot of old-economy businesses, including minority stakes in Canadian National Railways, Deere & Co., Waste Management, Inc, and, of course, Berkshire Hathaway. Warren Buffett and Gates are good friends. They like playing bridge together, and Buffett is happy to give some of his money to the Gates Foundation. Gates reciprocated by buying a stake in Berkshire. 

Cascade owns a minority stake in the recently listed used car e-commerce platform, Vroom. Still, for the most part, the investment office takes stakes in highly profitable, cash generative old economy businesses. 

When it comes to venture/new economy investing, Gates’ public investments appear to go through his name rather than a business although at least some of these investments are probably facilitated by Gates Frontiers, previously Gates Ventures. Based in the same building as Cascade, Gates Frontiers probably share some resources with its co-inhabitant. SEC filings show Gates Frontiers/Ventures held shares in Beyond Meat, the clean meat company, and Exicure, a biotech company. 

In recent years, Gates/Gates Frontiers has added to its holdings in clean meat companies and biotech. Other recent investments have included data security company Evolv Technology and radar company, Echodyne. There are many more investments, and most appear on Crunchbase. 

Unlike Cascade, where Larson has a big say in asset allocation, it’s not clear who directs the venture investments for Gates. Larson probably has some say on some deals, but, given Gates’ background as a tech entrepreneur, the billionaire probably directs many of the venture deals himself

Gates name pops up again in the venture world with his involvement in Breakthrough Energy Ventures, which he orchestrated setting up and continues to play an important role as chairman and financial backer. Breakthrough specializes in cleantech energy and agri-tech type investments. It has invested in cutting edge cleantech technology businesses across areas like nuclear fusion to the latest developments in crop technology.  

The Bill & Melinda Gates Foundation is also a big investor and grantmaker in the venture world. The Foundation has often seeded impact-focused startups, which have gone on to be very successful. Apeel Sciences, an innovative waste management technology company, which the Foundation got started with a grant, is today valued at Unicorn levels, or close to it. 

Gates’ commercial real estate investments are also sizeable. A big part of his known property investments comprises the Tampa, Florida-based Strategic Property Partners. A joint venture between Cascade Investment and hedge fund billionaire Jeff Vinik, SPP backs one of the biggest commercial redevelopments anywhere in the US right now. It involves the renewal of a 50-acre site in downtown Tampa. Cascade also owns 1000s of acres of farmland in the Sunshine State, by repute.

Gates’ investments sometimes surface in unusual areas, particularly when they are outside the US. Cascade and the Foundation own a minority stake in the Swiss construction materials company, Sika. Back in 2015, Cascade got involved in a dose of corporate activism again some family shareholders in Sika. This revealed Gates’ interest in the business, which continues today. 

The Gates family also have a considerable number of passion investments including The Codex Leicester, which is a collection of scientific writings by Leonardo da Vinci, and rare cars. There’s plenty about those objects on the internet. But larger parts of the Gates’ investment portfolio are likely to remain hidden from public view.

Despite the sometimes lack of transparency, what is probably most instructive about the Gates investment model for family investment groups is how it has created a unique hybrid structure whose influence and power are immense. 

Looking from outside, Cascade and Gates Frontiers are trying to create investment outcomes, which ensures the family enjoys a billionaire lifestyle. But most importantly, investment returns are about providing the family’s philanthropic objectives can be met. This will create a lasting legacy for further generations of his family – and, most importantly, the beneficiaries of the Foundation’s philanthropic efforts.  

Bill and Melinda laid the groundwork for this model. Younger big tech billionaires will surely follow in their footsteps.  

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