FamilyOffice10x - I Can't Eat IRR - Ned Brines, Chief of Investment Strategy at Arnel & Affiliates

I can't eat IRR. Can't put gas in the plane with IRR.

How do you think about concentration versus diversification when a family office has the ability to make high conviction bets? We're all about concentration.

We also have a concentrated stock portfolio, eight stocks. We see something that we want or we have something that we like, we're going to bet there. That position is going to be pretty large.

But that will be earmarked as risk capital. That's where you're making concentrated bets. Everything's risk

capital. I mean, everything's risk capital at some level. Downside volatility is great for us. We don't see a lot of it. We haven't seen a lot of it over the last decade, but there's been a few instances. And we like that because we're able to step in and buy assets that maybe we've been watching for a long time that we like, but are too expensive.

So we'll take that. But to apply that strategy into practice of deploying into downside volatility is that you need to have that amount of cash with you. Our

cash has been as low as 4% since I've been here, and it's been as high as 24. We were really high in that 20% range heading into COVID. So we were able to get a bunch of capital to work during that little window. And, you know,

obviously that worked out. What have you learned about the hidden risks of private markets that don't show up in headline return numbers?

You know, IRR, the internal rate of return that everybody markets around, you know, that number gets manipulated pretty easily. subscription lines being the easiest one.

Over the next decade, where do you think family offices will have the biggest structural advantage over institutional investors? So we're going to carry a lot of cash and then

we'll wait. And then when there's a big breaks, we're going to step in and buy assets. Institutions can't do that. They have other, you know, mandates, you know, they got to stay fully invested. They have cash calls on their, on their portfolios, et cetera. So I think that's an advantage for us. The disadvantage is taxes.

Hey everyone, this is Prashanth and I'll be your host for the VC10X podcast and today we have Ned Preenis with us. Ned is the Chief of Investment Strategy at Ernell & Affiliates, a single family office in Southern California where he runs the portfolios for the family and its foundation. We talk about why 30 managers is not a diversified portfolio, what role real estate plays in a portfolio. how irr gets manipulated the size of the cash position he likes to hold and wait for the right time to invest he also shares why he waited fourteen years to buy a stock he started watching in nineteen ninety five so without wasting any time let's dive straight in This episode is brought to you by Podcast Enix, my podcasting agency for VCs. We help VCs start and run branded podcasts that can serve as their entire content engine. Turn the conversations you're already having into a machine. One recording becomes your presence on LinkedIn, Spotify, YouTube, and email. Don't just build another VC firm, build a firm that can stand out to LPs and one that founders can brag about having you on their cap table. Check out our services at podcastnx.com. I'll