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whitepaper
By AngeIo RobIes, umIIy Omce AssocIuLIon
magine taking a $50 million fortune and
multiplying it 100-fold in 18 years, to $5
billion.
Sid Bass didn't have to imagine. He watched his fortune do just that. And there were two secrets to his success:
First, he chose to empower his Single Family Offce (SFO) to invest directly, rather than outsourcing portfolio
management.
Second, he hired the genius investment manager Richard Rainwater to run the SFO's investmentswhen
Rainwater was an untried 26-year-old working at Goldman Sachs.
Although the Bass/Rainwater success story is well-known, many SFOs lack a true direct investment focus.
nstead, they tend to allocate to outside managers and funds so they can concentrate their efforts on the family's
tax, legacy and lifestyle affairs.
But this may be a grave mistake. Like Sid Bass, families of signifcant wealth can become true investors: when
they take the reins and actively use their capital to make deals, they can magnify their wealth. n the process,
they create a new company, engage the family, and control their tax picture betterwhether their wealth stems
from the efforts of one individual, or several family members. n fact, taking this more hands-on, entrepreneurial,
rigorous approach to investing may actually create a path to entrepreneurship for some next-generation family
members.
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
2
Let's look more closely at how Sid Bass and his SFO investment offcer Richard Rainwater achieved such
amazing success togethersuccess neither one of them would have likely achieved alone. Richard Rainwater
needed the vision and support of multi-generational wealth principal Sid Bass. And the Bass family fortune
would be smaller without Rainwater's involvement.
s Richard Rainwater a one-of-a-kind investor? Perhaps. However his principles, vision, and engagement
contain lessons for all wealthy principalsand their family offces. Far too often, family investment offces fail to
fully engage the principals and leadership. While families may desire world-class investment operations, they
frequently lack the dedication, processes, governance and investment talent to be genuine dealmakers. For
instance, too many families of wealth are too short sighted to pursue, engage, and properly compensate top
talent.
While we hope this white paper motivates families to think more like the Basses, this does not mean this
approach is the right one for every wealthy family. For manyperhaps mostfamilies of wealth, it is not.
However, even if you decide to manage your investments in a more conventional way, you can learn a lot by
studying the Basses and considering a more entrepreneurial, family-controlled, separate investment offce.
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
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Let`s begin our story.
Sid Bass's father, Perry Richardson Bass, built an oil fortune with Sid's uncle, Sid Richardson, who passed away
in 1959. Perry Richardson Bass passed the reins of the family business and capital to Sid Bass in 1968, when
Sid reached the "ripe old age of 26. (This interesting lesson in family stewardship and leadership is a story for a
different time.)
Wishing to build an internal investment offce for the family capital, Sid had the foresight to hire fellow Texan and
Stanford Business School classmate Richard Rainwater in 1969. Also 26, Richard was an investment banking
professional early in his career at Goldman Sachs. Sid originally desired to build an offce with multiple talent
but he discovered that Rainwater did the work of several people.
While hiring Rainwater was a bold and risky move, Rainwater also took a risk: he left a promising career at a
Wall Street titan to work for a family, at a time when the single family offce profession was almost unknown.
The collaboration got off to a rough start; Rainwater lost $5 million in his frst year working for Bass.
1
However,
Bass stayed with his choice, and Rainwater further studied the principles of value investing. He learned both
from the then relatively unknown Warren Buffett and the already iconic Benjamin Graham. Rainwater proved a
quick learner, and rapidly multiplied the Bass family wealth.
He also studied the energy industry in depth, even reading apocalyptic environmentalists like James Kunstler
and the Club of Rome, who were predicting dire consequences from peak oil. Rainwater understood that
approaching oil's limits would dramatically increase its price, so he staked out positions to beneft from rising oil
prices. The fortune grew from $50,000,000 when he started to more than $5,000,000,000 by the time Rainwater
left to form his own investment frm in 1986taking about $100,000,000 that he'd earned in his years managing
the Bass family fnances.
Rainwater's smarts, vision and patience would, of course, play into this. However, let's not underestimate
the equally young Sid Bass's wisdom (and great eye for talent) to not only hire Rainwater, but also to set the
framework for amazing success for over the next 17 years. Bass was just as eager to learn, and willing to
take chances. Although conventional wisdom tells us to diversify investments to reduce risk, Bass was willing
to concentrate his holdings. Bass also realized that investing in startups and venture could produce outsized
returns.
________________________
1
https://en.wikipedia.org/wiki/Richard_Rainwater (this article also includes the information about peak oil in the following paragraph)
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
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________________________
2
Mack nternational LLC is a boutique frm specializing in retained executive search and consulting services for fnancial services and wealth management industry
clients.
3
http://www.nytimes.com/1988/06/05/business/texas-deal-maker-robert-m-bass-a-younger-brother-steps-out-on-his-own.html
1o auracL and reLaln a LalenL as powerful as 8alnwaLer (perhaps a blL exLreme, as Lhere ls only one 8alnwaLer), an
annual salary wlLh yearly bonus wlll noL sumce. lamlly declslon makers who deslre Lrue lnvesLmenL LalenL need
Lo oer equlLy and co-lnvesung (oen wlLh golden handcu provlslons Lo encourage reLenuon). As Llnda Mack,
founder and presldenL of Mack lnLernauonal LLC,
!
puL lL, 1he compensauon package musL lnclude lncenuve
vehlcles Lo engage, mouvaLe and reLaln Lhe lnvesLmenL execuuve long-Lerm. 1he key Lhlng Lo remember ls LhaL Lhe
hlgh performlng execuuve wlll remaln wlLh Lhe famlly as long as Lhey are sumulaLed and falrly valued and rewarded,
lf Lhey feel Lhey are noL, Lhey'll leave. Whlle compensauon ls very lmporLanL Lo successfully mouvaung and reLalnlng
Lop lnvesLmenL LalenL, oLher crlucal facLors lnclude havlng a clear mandaLe and Lhe resources and declslon-maklng
auLhorlLy needed Lo successfully carry lL ouL."
1hls was perhaps easler for 8ass, because he had compleLe conLrol and dldn'L have Lo seek Lhe approval of oLher
famlly members.
Convenuonal famlly omce wlsdom holds LhaL acuve wealLh creaLors are more llkely Lo embrace Lhls more enLrepre-
neurlal lnvesLmenL omce approach-and pay Lhe fees needed Lo auracL and supporL key LalenL-Lhan nexL-genera-
uon lnherlLors llke Sld 8ass, however, Sld 8ass deed convenuonal wlsdom.
noL every famlly of greaL wealLh should open lLs own lnvesung omce. ?ou may be beuer served by allocaung Lo
managers /funds or even ouLsourclng Lhe ClC funcuon. Cr you may be scared o by Lhe hlgh seL-up and compensa-
uon cosLs-or by negauve feedback from oLher famlly members or advlsors, who may have Lhelr own agendas. 8uL
lf you value LoLal conLrol, prlvacy and compleLe cusLomlzauon, aL leasL look lnLo Lhe posslblllues. lL could be Lhe
greaLesL declslon you ever make. Pad Sld 8ass llsLened Lo Lhe naysayers, he would noL have Laken Lhe approach LhaL
he dld, and would never have made lnvesLmenL hlsLory wlLh hls success. Pe succeeded because he llsLened Lo hls
hearL-and because he had Lhe vlslon, eye for LalenL and maverlck capablllLy Lo pull lL o.
After the early learning curve, the investment offce was more focused on stock picking and the pair met with
success. And as their capital grew and their confdence soared, bold moves became the norm in both public
equities and private company transactions. The company developed an eye for undervalued, distressed
companies that could be purchased cheaply and infused with new life as Bass and Rainwater brought in their
own management team.
Bass and Rainwater navigated the 70s with stellar success, almost entirely under the radar of the outside world.
But in the early 80s, the pair's tactical investments in Texaco and Disney would make front-page news, forever
ending the anonymity they'd enjoyed until thenand their legend was cemented forever.
The gravest challenge to great family wealth is often family confict, and so it was for the Basses. By 1985, Sid's
three brothers, Edward, Robert, and Lee, would break off from Sid's control and manage their own investments.
3

And the following year, Rainwater went out on his own.
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
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________________________
4
http://www.forbes.com/sites/christopherhelman/2013/09/17/forbes-400-the-richest-people-in-texas/
5
http://www.forbes.com/lists/2007/10/07billionaires_Sid-Bass_0WSQ.html
6
http://www.dallasnews.com/business/columnists/cheryl-hall/20111126-standing-by-their-man.ece
When Rainwater left the Basses, he followed the same investment principles he'd perfected with Bassbut this
time, exclusively with his own capital. Rainwater created Ensco nternational, Crescent Real Estate Equities and
co-founded Columbia/HCA Healthcare, where he made countless amazing and concentrated investments. Not
surprisingly, he signifcantly amplifed his wealthinto the billions.
Rainwater and all of the Bass brothers are on Forbes magazine's list of the 400 richest Americas. As of
September, 2013,
4
Sid is #38, with $1.8 billion (down from a pre-recession peak of $3 billion).
5
His brothers have
all amassed even greater wealth: Robert, the wealthiest of the family, is #22, with $2.8 billion. Edward, #30 ($2.1
billion), Lee, #31 ($2.1 billion).

Rainwater is #24, with $2.6 billion.
For both Rainwater and Bass, unconventional thinking is a key trait; both are extreme contrarians. Rainwater
sees opportunity in chaos. Rainwater and Bass sought companies with great long-term potential that struggled
with leadership and poor performance; these companies would agree to their price. They then brought in the
right board and management to lead these frms and allowed them the freedom to execute their ideas. And they
sweetened the pie with great fnancial rewards for the c-level executives, if they succeeded. Nothing illustrates
this better than Rainwater and Bass's investment of $478 million in Disney. Rainwater brought in a young Michael
Eisner, formerly of Paramount Pictures, as CEOsupposedly after a seven-minute phone call with Eisner.
The trail of wealth Rainwater created even touches the White House. Rainwater had more than a little to do with
George W. Bush's $14+ million proft on the purchase and sale of the Texas Rangers baseball team.
6

Unfortunately, in 2009 the great Richard Rainwater was diagnosed with Supranuclear Palsy, an untreatable brain
disease. Our prayers and best wishes go out to him and his family.

Robert Bass (Sid's brother) has also proven himself a talented investor and an acute judge of talent (this trait
must run in the Bass family). David Bonderman, Jim Coulter (both would go on to found TPG) and Tom Barrack
(who started Colony Capital) were all part of the Robert Bass family offce.
1he 8asses are noL alone ln Lhls approach. Mlchael uell's MSu CaplLal, 3C CaplLal, and oLher Lrue famlly omces
lnvolved ln dlrecL lnvesLmenL conslsLenLly hlre Lop LalenL and bulld a sysLem, processes, and governance noL [usL Lo
reward Lop LalenL, buL Lo brlng Lhem on as shareholders-wlLh compensauon ued Lo Lhe success of Lhe enLerprlse.
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
6
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You may or may not be lucky enough to hire "the
next Richard Rainwater. But you can still beneft
from the strategy Bass and Rainwater deployed to
achieve enormous success. Like Bass, your family
offce can build a separate investment company
with the vision, infrastructure and talent to succeed.
While your family vision, connections, and capital
help fuel your success, bringing in the right talent
is critical. To attract smart, young, dynamic and
hungry investment managers from felds such as
investment banking, you'll need to offer a stake in
the enterprise. Of course, you'll protect your family
fortune with equity buyback and golden handcuff
provisionsbut the deal has to be sweet enough
to attract and keep these gifted professionals. They
have plenty of options, after all, and you may need
them more than they need you. Salary, perks, and
bonus alone will not cut it, but a signifcant equity
share that rewards performance could be just the
ticket.
The costs of setting up a separate, dedicated
company to manage direct investments of family
wealth are signifcantbut the potential rewards
when this approach succeeds are far, far greater.
n future white papers, we'll tackle the issues
of infrastructure (for some families, global),
governance and talent /compensation in building a
global investment offce.
ls semng up a dedlcaLed separaLe buslness omce Lo handle
your lnvesLmenLs Lhe rlghL move for you? Maybe-and
maybe noL. 1hls paLh makes sense for only abouL one ln
20 ulLra-hlgh-neL-worLh famllles. ?eL Lhose few LhaL are a
good L can amp up Lhelr asseLs dynamlcally, rapldly, and
wlLh more conLrol Lhan Lhrough oLher avenues-so lL's
worLh conslderlng.
ueLermlnlng lf a dedlcaLed famlly lnvesLmenL omce makes
sense for your famlly ls a very lndlvldual mauer. lf you're
conslderlng lL serlously, you should denlLely geL experL
advlce. As a rsL sLep, Lhe prellmlnary qulz below can help
you gure ouL lf lL's even worLh explorlng. lf you answer
yes Lo Lhree or more quesuons, lL's ume Lo consulL wlLh
experLs who can help you make Lhe rlghL declslon. (uls-
closure: we aL lamlly Cmce Assoclauon oer educauonal
programs on Lhese Loplcs and may be posluoned Lo gulde
you Lowards Lhose LhaL can help you declde.)
" uoes your famlly have a neL worLh exceedlng $200
mllllon or so?
" Are you wllllng Lo spend slgnlcanL ume and
money golng Lhrough a Lhorough hlrlng process Lo
nd Lhe rlghL parLner(s)?
" Are you prepared Lo oer your lnvesLmenL man-
ager a share of Lhe enLerprlse and a compensauon
package worLh Lhe professlonal's ume?
" Are you comforLable wlLh a hlgher degree of rlsk-
and wllllng Lo move qulckly on deals?
" Can you provlde ln-house caplLal Lo acqulre a
conLrolllng lnLeresL ln Lhe companles you choose-
and are you wllllng Lo be hands-on ln chooslng
and lnsLalllng your managemenL Leams aL Lhese
companles?
" Are you a prlvaLe person who prefers Lo work
behlnd Lhe scenes and ouL of Lhe llmellghL?
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
7
,-."/'
AngeIo J. RobIes
Angelo J. Robles is Founder and CEO of the Greenwich, Connecticut-based Family Offce Association (FOA),
a global membership organization that delivers private educational and networking opportunities, proprietary
research, and access to salient thought leadership to multiple generations of wealthy families and the
professionals who run their single-family offces.
A member of the Princeton Council on Family Offces and the NYU Stern Family Offce Council, Mr. Robles has
a long record of leadership positions at top fnancial-service companies, including UBS. Before launching FOA,
he founded and ran several successful entrepreneurial ventures: He served as President of the New England
chapter of the Hedge Fund Association, and pioneered online retirement planning for Fortune 1000 executives
with two nternet startups401KRollover.com and RARollovers.com.
n FOA, Mr. Robles has created a resource unique in the family-offce world: a fount of keen insights into
strategic investingdelivered personally by some of the world's top investorscoupled with servings of thought
leadership typically confned to gatherings like World Economic Forum, Clinton Global nitiative, and the Milken
nstitute Global Conference. This mix provides FOA members access to many of the world's sharpest minds:
from David Rubenstein, Co-Founder and Co-CEO of The Carlyle Group, to PayPal co-founder Peter Thiel; from
James Chanos, Founder and President of Kynikos Associates, to rish-born Walter O'Brien, a scientist so vital to
the future of artifcial intelligence that the U.S. fast-tracked his visa application as it did for Albert Einstein.
Through this aggregation of many of the world's fnest thinkers and doers, Mr. Robles offers his members a
unique and privileged window into the future of global business and fnance, health and social trends, technology,
and philanthropic opportunities most likely to make an impact. All FOA programs are specifcally designed
to address the unique challenges that wealthy families and the professionals who serve them face: wealth
protection and growth.philanthropic impact.security concerns.and the use of technology to advance their
fnancial, legal and social interests.
Author of several books and articles, Mr. Robles has appeared on Bloomberg Television and Radio, and has
been quoted in the Wall Street Journal, Thompson Reuters, nstitutional nvestor, Opalesque, Registered Rep,
HFM Week, nvestment News, EurekaHedge, The Luxury nstitute, Private Asset Management, The Greenwich
Times, and many other media outlets.
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
8
The Family Offce Association (FOA) is an affnity group dedicated primarily to the interests of Single Family
Offces. FOA is intended to provide members with educational information and a forum in which to exchange
information of mutual interest. FOA does not participate in the offer, sale or distribution of any securities nor does
it provide investment advice. Further, FOA does not provide tax, legal or fnancial advice.
Materials distributed by FOA are provided for informational purposes only and shall not be construed to be a
recommendation to buy or sell securities or a recommendation to retain the services of any investment adviser
or other professional adviser. The identifcation or listing of products, services, links or other information does not
constitute or imply any warranty, endorsement, guaranty, sponsorship, affliation or recommendation by FOA. Any
investment decisions you may make on the basis of any information provided by FOA is your sole responsibility.
The FOA logo and all related product and service names, designs, and slogans are the trademarks or service
marks of Family Offce Association. All other product and service marks on materials provided by FOA are the
trademarks of their respective owners. All of the intellectual property rights of FOA or its contributors remain the
property of FOA or such contributor, as the case may be, such rights may be protected by United States and
international laws and none of such rights are transferred to you as a result of such material appearing on the
FOA web site.
The information presented by FOA has been obtained by FOA from sources it believes are reliable. However,
FOA does not guarantee the accuracy or completeness of any such information. All of such information has been
prepared and provided solely for general informational purposes and is not intended as user specifc advice.
01+2(&13#'
2014 Family Offce Association and Angelo J. Robles
Family Offce Association / WHTEPAPER
9
To learn more about FOA contact:
Angelo J. Robles of Family Offce Association
203-570-2898 . angelo@familyoffceassociation.com
Family Offce Association
500 West Putnam Avenue, Suite 400
Greenwich, Connecticut 06830
www. familyoffceassociation.com