CIO Greatest Hits: Single Family Offices – Steve Rattner (Willett Advisors) | Capital Allocators – Inside the Institutional Investment Industry Brief

Key Takeaways

Steve Rattner's diverse career, spanning journalism, banking, and public service, provided a unique, adaptable foundation for his investment leadership role.
Willett Advisors, Michael Bloomberg's family office, adopted a conservative, endowment-inspired investment model, primarily leveraging external managers for diversification.
Willett differentiates through its commercial flexibility, enabling direct private equity and real asset investing to optimize fees and access unique opportunities.
Rattner emphasizes focused, concentrated investment strategies and seeks "owner-operator" managers, believing the human element drives superior long-term performance.
He critiques the growing trend of corporate stewardship, arguing companies' primary role is shareholder value, not solving broad societal problems governments neglect.

Steve Rattner transitioned from journalism at The New York Times to investment banking, driven by a desire for active involvement in business. His journalistic skills, like asking incisive questions and conducting due diligence, proved highly transferable.
His career further diversified into private equity and, notably, public service during the 2008 financial crisis, where he led the auto industry restructuring. This role required navigating complex financial and political landscapes without prior industry expertise, highlighting his adaptability.

Rattner founded Michael Bloomberg's family office, Willett Advisors, initially admitting limited investment knowledge but drawing inspiration from David Swenson's successful endowment model. The firm adopted a conservative approach given its significant philanthropic mandate, where failure was not an option.
Starting in 2008 during the financial crisis, Willett had the unique advantage of a clean slate, unburdened by legacy illiquid assets that challenged many established institutions. This allowed them to build a portfolio with fresh capital.

Willett Advisors primarily utilizes external managers for broad diversification but strategically integrates internal direct investing, particularly in private equity and real assets. This "special sauce" leverages its commercial flexibility, competitive compensation, and the Bloomberg name for unique deal access.
This hybrid model helps reduce fee drag and provides greater control over capital flows compared to purely external management, while still benefiting from global market exposure. Rattner emphasizes that the majority of assets remain externally managed.

Rattner views hedge funds as a fee structure, anticipating a shakeout as diminished excess returns make high fees unpalatable unless justified by superior net performance. He maintains a robust allocation to long equities, aligning with Mike Bloomberg's belief that beta drives primary returns.
He expresses strong excitement for China as an investment market, citing its favorable valuation relative to growth and energetic entrepreneurial spirit. Conversely, he finds quality venture capital portfolio building a persistent challenge due to high performance dispersion, requiring partnerships only with top-quartile managers.

Rattner voices concern about the growing trend of corporate stewardship, where companies are increasingly expected to solve societal problems governments fail to address. He aligns with Milton Friedman's view that a company's primary responsibility is to serve shareholders ethically and legally.
He questions the practical implications of broadening corporate responsibilities beyond shareholders, suggesting that customer purchasing power, rather than forced corporate action, is a more appropriate driver of social change. He also expresses pessimism about government's current ability to find bipartisan solutions.