The Billionaire's Club
One good thing about the state of the economy in Connecticut is that it has made us perhaps a little more humble and empathetic. A little more grateful for our families and friends. A little less consumed with crass concerns like big houses, or luxury cars, or which of our neighbors makes how much.
Money counts, today more than ever. How much is enough? More than we have at the moment, it’s safe to say, and most likely not nearly enough to feel “well off.” We can guess who is doing well by the size of their homes (though not necessarily, given the rising foreclosure rate among the wealthy) and the year, make and model of the cars in their driveways. But it’s easy to spot those who float at the very top of the heap. They’re the ones who make Forbes magazine’s annual list of the 400 richest Americans.
Eleven Connecticut residents have found a spot on the most recent Forbes list. Their net worth is estimable not in the millions, nor tens of millions, nor even hundreds of millions. They live in mansions behind gated walls and drive any number of expensive motor vehicles. Together, these 11 constitute one of the state’s most exclusive clubs—and certainly its wealthiest.
All of the Connecticut 11 on the 2010 Forbes list are billionaires, some many times over. Most are under 60. All but one are male and, with the exception of the sole heiress on the list, are self-made billionaires. Nine, including five of the top six, are hedge-fund managers or founders of other types of investment firms. Eight members of the club live in Greenwich.
This last statistic should come as no surprise. Greenwich is the hedge-fund capital of the country, if not the world, with more than 100 funds located in and around the town, plus numerous private-equity firms. And why not? It’s close to Manhattan and Wall Street but with a friendlier tax environment—and more husband-oriented divorce laws—than New York. It’s beautiful, and has excellent public and private schools and affordable (compared with Manhattan) office space. What’s more, it’s home to other, breathtakingly successful high-net-worth individuals.
“Greenwich has taken on this image of being a hedge-fund hot spot, and that alone has fueled the growth and interest in being located there—for networking and for prestige,” explains Richard Wilson, who heads the Hedge Fund Group and the Certified Hedge Fund Professional (CHP) Designation, an industry certification program.
In a town like this, being named to the Forbes 400—the financial equivalent, perhaps, of receiving an invitation to Truman Capote’s 1966 Black & White Ball or a locker at the Augusta National Golf Club—separates the big-money men from the small-change (read “multimillionaire”) boys.
At the head of the billionaires’ table in Connecticut is Steven A. Cohen, 54, founder of the hedge fund SAC Capital Advisors, and a very serious art collector. Cohen credits playing poker in high school with teaching him the art of risk taking—a skill that’s paid off rather well for him as a hedge-fund manager. His 2010 net worth, according to Forbes, is $7.3 billion, enough to place him No. 32 on the national list (three spots ahead of Facebook founder—or co-co-founder, according to lawsuits and the film Social Network—Mark Zuckerberg, who, at 26 and at last count, is worth an estimated $6.9 billion).
Behind Cohen on the Connecticut list are Ray Dalio of Bridgewater Capital Associates, reportedly the biggest hedge fund in the world, and Edward Lampert, founder of ESL Investments, another hedge fund, who is also chairman of Sears Holdings Corp. They rank Nos. 55 and 101, respectively, with net worths of $5 billion and $3.1 billion.
Paul Tudor Jones, No. 110, whose Tudor Investments Corp., a fund of funds (or collection of hedge funds), has averaged impressive annual returns over the past 20 years. Forbes estimates his fortune at $3 billion. Coming in at No. 252 is Lone Pine Capital founder Stephen Mandel, who apprenticed at Julian Robertson’s legendary Tiger Management hedge fund. Lone Pine is routinely one of the top-performing funds in the world. Mandel’s wealth is estimated at $1.6 billion.
No matter their numerical ranking—a crude way, admittedly, of measuring success—Greenwich residents on the Forbes 400 do seem to enjoy the company of their peers. “People who are on the list tend to associate with other people on the list,” says Ron Sheiman, a Westport tax attorney and adviser to high-net-worth individuals, including some who’ve made the Forbes 400. “Being in a select class of people affords them networking opportunities and entrée into circles that they might not otherwise have.”
One question that comes to mind when considering Forbes-caliber money is this: How can one person possibly make that much?
Basically, hedge funds and other alternative investment pools make money by playing with other wealthy people’s money. In a simplistic explanation of a highly complex business, by aggressively playing with huge amounts of pooled capital and “hedging” their bets—going short and long on publicly traded securities—then using “leverage” (meaning borrowing) to increase the risks but also the rewards of those bets, hedge-fund managers can reap huge profits for their investors but also for themselves. Fund managers typically collect a 2 percent management fee and a 20 percent, or higher, performance fee.
“It is possible for them to make upward of a billion dollars in one year because they are managing large sums of money in a way that lets them share in the profits with their investors,” says Richard Wilson. Of course their personalities play into it, too.
“They are very hungry to do very, very well,” he says.
In October 1987, Paul Tudor Jones bet big that Black Monday would happen, and tripled his wager when it did. In 2004, Edward Lampert became the first hedge funder to earn more than $1 billion in a single year. Steve Cohen topped that in 2009, when he made $1.4 billion.
Disposable income in these lofty reaches makes many things possible, including producing even more disposable income. But it most noisily manifests itself in real estate. And in Greenwich, that can get really loud.
A billion is the new million. It buys whatever it wants. One of the things it most values and wants, along with luxury, is privacy. None of the Connecticut 11 approached for this article would agree to discuss their inclusion on the Forbes list, or anything else, for that matter. For clues to where and how they live, the best place to look is the Greenwich assessor’s office, which rigorously tracks residents’ property.
In one of the biggest real estate transactions in Greenwich history, Thomas Peterffy, the Hungarian-born founder of the automated firm Interactive Brokers Group, bought 80 acres and a small village of buildings in Conyers Farm, a sprawling gated equestrian community in backcountry Greenwich, six years ago for a reported $46 million. The property includes a turn-of-the-20th-century, 8,038-square-foot mansion surrounded by farmland and woods. While most Greenwich homeowners provide photos of their property to the assessor’s office, Peterffy refused. According to field cards filed in the office, however, other structures on the land include a barn, two conventional houses, a guest house and a pool house. He also owns a 3,000-plus-square-foot condo on Sound Shore Drive in town.
Steve Cohen lives in a 35,000-square-foot pile on 14 acres in north Greenwich, part of an estate he bought in 1998 for $14 million. Unless one has several hundred children (Cohen reportedly has seven), why would anyone need that much room? Well, if you’ve got multiple billions, why not? The 30-room mansion includes an indoor pool and basketball court, and a 6,734-square-foot outdoor ice rink with its own Zamboni. The house is said to resemble Buckingham Palace.
To be fair, people like Cohen also need lots of floor and wall space for art—not portraits of dogs on velvet sitting around a card table playing poker, but real art. Over the years, Cohen has assembled an extraordinary collection of works by Picasso, Cézanne, Warhol, Francis Bacon and Jeff Koons, among others. His most notable acquisitions include a Pollock “drip” painting for $52 million and a de Kooning landscape for $63.5 million (both purchased from music mogel David Geffen). But his biggest splash in the art world came when he purchased “The Physical Impossibility of Death in the Mind of Someone Living”—a very dead 14-foot shark floating in a tank of formaldehyde—for $8 million by British artist Damien Hirst (who doesn’t live in Greenwich but probably could if he wanted to). In November 2008, Cohen and his second wife, Alexandra, applied to the Greenwich Planning and Zoning Commission for a special permit to add an additional 1,145 square feet to their house—perhaps they have a larger tank and species in mind.
Meanwhile, some Greenwich billionaires are known to spend their money for more ephemeral things. Ray Dalio, who lives with his wife, Barbara, in an 1891 5,500-square-foot colonial in the gated Belle Haven section of town, once hosted a benefit party featuring the Allman Brothers and Bonnie Raitt.
Paul Tudor Jones appears less concerned with privacy than with sharing a radiant message with the public. For 10 nights every Christmas, he puts on a massive Christmas show from his Belle Haven estate, his property festooned with 15,000 lights and his own radio show broadcasting synchronized holiday tunes. Some Greenwich residents have called the display of wattage and wealth “garish.” Others, including some Belle Haven neighbors, have called to complain to the Greenwich police. Those calls may well have fallen on deaf ears, however: Most of the town’s patrolmen were no doubt doing double duty directing traffic for the public event, which is said to draw thousands of residents and out-of-towners.
As for Jones’ property itself, at first a clerk in the Greenwich assessor’s office has trouble identifying it. “It may be under a company,” she says. “The majority of wealthy homeowners have them under LLCs.” In fact, a few years ago Jones transferred the house and land to a Manhattan law firm. After digging through field cards, the clerk finally comes across another category of property: cars. Even she is astounded by what she finds.
“Holy Mother of God!,” the woman exclaims. “There’s a Honda—maybe that’s the maid’s or the nanny’s—a Mercedes, a Caddy Escalade, a Lexus, an Oldsmobile, a Plymouth, a Suburban, another Cadillac, a Chevy station wagon, another Mercedes . . .” She pauses. “Wait—oh, this must be a trailer for the boat.” The vehicles are rumored to be kept in a 25-car garage beneath the 13,153-square-foot mansion, which has been said to resemble “a cross between Tara and a national monument.” (And that’s just in Greenwich. In 2002, Jones leased 340,000 acres of the pristine Grumeti Reserves in Tanzania’s western Serengeti as part of a conservation project and luxury safari resort, minus the hunting.)
Meanwhile, life isn’t exactly shabby for members of the billionaires’ club beyond the Greenwich city limits. Richard Chilton Jr., founder of Chilton Investment, a hedge fund, lives in Darien in a 9,000-square-foot colonial built in 1927. Karen Pritzker lives with her husband and children in Branford in an 8,000-square-foot gabled and clapboard mansion, and owns some of the Thimble Islands. (Pritzker and Chilton are relatively far down on the Forbes list: They are tied at No. 308.)
In some respects, new money as represented by the Forbes 400 resembles old money. At a time when the town is seeing an influx of international moguls who want to show the world what they’ve accomplished, these home-grown billionaires are trying to keep a low profile.
“Greenwich used to be slightly more open about houses and money,” says Tamarr Lurie, a realtor with Coldwell Banker in Greenwich and one of the most successful brokers of high-end real estate in the area. “Everyone knew everything. But buyers and sellers are more guarded these days. It’s no secret that Wall Street is trying to keep a low profile—they don’t want their names all over the place.” According to Lurie, everyone involved in high-end transactions in town these days must sign confidentiality agreements not to divulge any information about the buyers or the sellers.
One of the disadvantages of being outted by Forbes, of course, is that overnight the entire world knows your business and how much you’re worth. That leads, unavoidably, to unwanted attention.
“These people don’t really have a choice of whether they’re on the list or not,” says tax attorney Sheiman, “but for a lot of reasons there are advantages to having a lower profile and not attracting attention. The greatest disadvantage to being an ultra high-net-worth individual is a loss of privacy. Big time.”
There is no file card in the Greenwich assessor’s office for Edward Lampert, the 48-year-old founder of ESL Investments who’s worth an estimated $3.1 billion. Nor will real estate agents, normally as talkative as mynah birds, discuss him or his property.
And with good reason. In January 2003, Lampert was kidnapped outside his office by four men, taken to a Days Inn Hotel, and bound and gagged while the men called his wife, demanding—in a Dr. Evil moment—$1 million. Aside from not asking for more, the kidnappers used one of their captive’s credit cards to order pizza. Lampert pointed out this flaw in the plan and suggested they get away while they could. After 30 hours, he was released and they were caught. According to police reports, they confessed to targeting Lampert after researching fat cats online.
To offset negative reaction to their outrageous fortunes—or perhaps from a genuine spirit of generosity and social responsibility—Connecticut’s billionaires donate their time and money to their alma maters and local charities. Many, in fact, start their own.
In 1995, Karen Pritzker, the Hyatt heiress, founded the My Hero Project, which provides a curriculum for teachers and after-school personnel to bring heroic role models into the classroom. The project also sends teams to Kosovo and Bosnia, among other regions, to run free media and video workshops.
Paul Tudor Jones has made generous donations to the University of Virginia, his alma mater, including funding for the $35 million John Paul Jones basketball arena in honor of his father. He also founded the Robin Hood Foundation, a charity supported by the hedge-fund community, including Steve Cohen, who is a director; the Excellence Charter School, the country’s first all-boys charter school; and the Bedford Stuyvesant I Have A Dream Foundation, which helps place inner-city students in colleges.
Politically, the state’s wealthiest residents are all over the map. Not surprisingly, some hedge parties the way they play funds. Cohen, for example, reportedly played both sides by contributing $59,000 to the Democratic Senatorial Campaign Committee’s coffers in 2006 and 2007, and another $58,900 to the National Republican Senatorial Committee in 2007 and 2009.
So what is it that most distinguishes the members of Connecticut’s billionaires’ club (besides their money, of course)? With the exception of the lone heiress, Pritzker, it’s their love of the game, of competing and winning. Most people would likely think of retiring after their first billion, but these guys don’t. They keep pushing, keep fighting for more, no matter what problems huge money brings with it.
“The outside view of high-net-worth individuals differs greatly from the reality of their lives,” notes Sheiman, the attorney and financial adviser. “They have obligations and issues that arise in their lives that are very different from the average person’s. There are problems involved in monitoring the funds, monitoring investments, monitoring people who are hired to watch over the funds and maintain some stability. These things amount to work.”
The most compelling characteristic of people with great wealth, according to Sheiman, is that the money does not necessarily put them at ease.
“They have financial comfort, they have physical comfort, but that does not mean that their social relationships are comfortable, or that their business relationships suddenly are devoid of acrimony or contentiousness.” Beyond the $50 million mark, he observes, “Money becomes largely irrelevant. The quality of their lives and their relationships is what receives heightened attention.”
On the other hand, probably not. Recently, the billionaires’ club’s attention has no doubt been riveted on a widening federal probe of alleged insider trading that so far has included two hedge funds with Connecticut ties. In late November, FBI agents raided the offices of Stamford-based Diamondback Capital Management and Level Global Investors, which has offices in Greenwich. Both funds are run by former managers of Steve Cohen’s SAC Capital Advisors. The raids came a month after U.S. Attorney Preet Bharara told the New York City Bar Association that many on Wall Street consider illegal inside information “a performance-enhancing drug that provides the edge to outpace their rivals and make even more money. Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance.”
Sounds like if they’re not already in Greenwich, the could be moving there soon.The Billionaire's Club