(Bloomberg) As the members of Tiger 21, a club of multimillionaire investors, await certified results from this year’s presidential election, they are bracing for change.
In addition to seeking out investment opportunities in a landscape reconfigured this year by political and pandemic uncertainties, they are also highly focused on hedging against the tax policies of a potential Democratic administration through careful estate planning.
Here’s how club members are investing now and what they are doing to protect their assets, based on conversations with chairs of Tiger 21 groups in Miami, Nashville, New York and Los Angeles.
Bitcoin and gold miners: “Between the lack of return in the fixed-income world and the uncertainty, a lot of people are moving into gold and Bitcoin,” said Avi Weintraub, president of real estate firm The Weintraub Companies and head of a Tiger 21 group in Miami. Members aren’t buying physical gold or the $76.1 billion SPDR Gold Shares exchange-traded fund (GLD), but are purchasing gold mining stocks and ETFs, including the VanEck Vectors Gold Miners ETF.
People who might have pooh-poohed Bitcoin eight months ago are seeing headlines about investors piling into the cryptocurrency and calling it gold-like, said Weintraub. “We don’t know where things are going — it could be great or really crazy or somewhere in between,” he said. “So why not have some? It’s sort of an insurance policy."
Silver: Some members have been buying silver based on the gold-silver ratio — how many ounces of silver it takes to buy one ounce of gold, said Jeff Hays, president of Arlington Family Offices in Nashville and chair of a Tiger 21 group in the city. As the ratio rises, it means gold has gone up more relative to silver, so investors figure silver may be a better value.
For anyone who bet on silver starting in March, when the ratio was as high as 124, it’s been a nice ride — the price of silver has risen from around $11 to about $24. The 10-year average is around 70, and the ratio is about 77 now.
Direct-to-consumer businesses: Tiger 21 members in Los Angeles are looking at direct-to-consumer businesses that have taken off due to Covid (like athleisure) or been launched to meet a need generated by Covid (like online therapy for mental health).
“It’s companies that are not going through Amazon, and there was always this idea that Amazon would own everything,” said angel investor and adviser Renée LaBran, who heads up a Tiger 21 group in Los Angeles. Two companies she is an investor in are athleisure company Carbon38 and gender- and size-inclusive underwear-maker TomboyX (she is on TomboyX’s board).
Real estate: As cash comes in from real estate sales and fund distributions, members are letting it accumulate. That’s in part for safety, but also to have dry powder for when opportunities arise in distressed commercial or residential real estate in New York City, said angel investor Lorine Pendleton, chair of a Tiger group in New York.
Estate planning: One fear among members is that if Joe Biden wins, the exemption that allows $23 million per couple to pass to heirs tax-free could go back to 2017 levels, or about half the current amount. That prospect has Tiger 21 members scrambling to work with estate attorneys to get the paperwork for asset transfers ready so that if Biden does win, they can move quickly before the end of the year.
“The emphasis is: Use your exemption, use your exemption, use your exemption,” said LaBran. “There’s been a lot of discussion about the best way to maximize the impact of the exemption, because some people’s kids are very young, some people are still planning on having more kids, some kids are grown, and the way you think about structuring things is different.”
To try and make the most of the exemption, a member might want to contribute an asset that they think is going to appreciate significantly in the future to a trust for heirs, said LaBran, rather than a highly valued asset, since it wouldn’t use up a lot of the $23 million exemption.
There’s also a lot of discussion about whether or not to take capital gains on assets now in case Biden wins, said Hays. “If the Democratic party wins the presidency and the Senate, there’s a thought that the long-term capital gains rate could basically double from its current 20%,” said Hays.
