Who's managing Oprah's money?

Who needs the Midas touch when you have the Oprah effect?

By Jamie Dlugosch May 19, 2010 3:59PM

You know how it works. The billionaire talk-show queen invites an aspiring businessperson, author, designer, etc., to be a guest on her show, and suddenly that person's project goes through the roof.


Well, The Wall Street Journal reports she's just hired a top money manager to run her personal fortune, and he's no doubt both hoping the Oprah effect works for him, too.

A personal, dedicated money professional is, of course, one of the privileges of wealth. Most of have to work with mutual funds, busy brokers and planners, or simply try to pick stocks all by ourselves.

But we can get some valuable clues by examining the investment philosophy of her hire, Peter Adamson. Because you can bet Oprah found one of the best around.


Previously Adamson worked as chief investment officer for Eli Broad, another billionaire and noted philanthropist. He  has a long track record of making money, the Journal article notes, regularly generating 3%-4% above the market, and he recently received an award for being the Large Foundation Manager of the Year.


So how'd he do it? Not by buying index funds tied to the major market indexes.


Nope, in his investment role for Eli Broad, Adamson followed an approach that was based less on traditional stocks and bonds and more on alternative investments. These alternative investments included hedge funds, private equity and distressed debt.


For example, many hedge funds have been aggressively shorting the euro long before the riots erupted in Greece. These guys and gals understood that huge debt loads in largely socialist countries would spell trouble for the European currency.


In so doing, they profited handsomely.


It is not too different than what Warren Buffett did with Goldman Sachs (GS). He didn’t go out and buy Goldman stock. Instead, he lent money in a preferred deal that gave him a guaranteed return including equity upside.


The wealthy and their managers are smart and they don’t sweat the gyrations of the stock market. Sure, they may own stocks, but they're really all about taking advantage of new ideas, finding new companies and capitalizing on others' woes.


The lesson for you and me, then, is to gain exposure to alternative investments as best we can. If we want to beat the market by 3%-4%, that is the only way to go.


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