You may not see a connection between a telecom company and a brand of gin. However, they do have one thing in common: Canadian actor Ryan Reynolds.
In 2020, he pocketed $610 million for selling Aviation Gin to Diageo, a British multinational alcoholic beverage company. And, upon the completion of the sale of Mint Mobile to the titanic T Mobile (if regulators allow the deal to go through), he could walk away with $337.5 million – his 25% share of the firm.
Nuvei – a company that specializes in offering payment services – is the actor’s latest investment adventure. Reynolds not only brings money to the table – he also (literally) puts up his face as his investment. According to Bloomberg, by lending his image to increase the popularity of the companies that he holds shares in, the actor has kicked off a whole new kind of relationship between celebrities and brand names.
Bloomberg notes that promoting a brand in exchange for money is no longer in fashion. Today, celebrities are asking for shares in the companies they advertise for, hoping to make more of a profit in the long run. Simply put, everyone wants to be like Ryan Reynolds. When stars risk their skin, they choose more carefully what they promote… and they work harder for brands, for a lower initial price.
While the Canadian can boast of having created a whole new style of promotion, there were other similar cases even before him. In 2015, instead of collecting the $6 million dollars that Uber offered her to promote the firm, Beyoncé very correctly asked that they instead pay her that same amount in shares of the then-fledgling company. In 2017, George Clooney also sold his premium Casamigos tequila brand to Diageo for $1 billion. Cases like these are certainly not commonplace… yet they exemplify how fame and fortune open investment doors that are closed to mere mortals.
Beyond these three big names, many other famous Americans look to investing as a way to further increase their wealth. They often enter the shareholding of specific companies. For instance, Mike Tyson, Michael Jordan and Will Smith hold stock in the world of eSports. Leonardo Di Caprio is one of the main shareholders of Diamond Foundry, a synthetic diamond manufacturing company. Some celebrities have gone a step further, opting to create their own venture capital firms. Kim Kardashian founded SKYY Partners to enter the capital markets of fashion, luxury goods, electronic consumption, tourism and entertainment. Ashton Kutcher created A Grade Investments back in 2010, with the intention of gaining a stake in Silicon Valley startups.
However, there are even more exclusive levels of investment. There are a tiny handful of people who, with a single word uttered, can cause tsunamis in the market. Warren Buffett – considered to be the best investor in history – and the eccentric billionaire Elon Musk are two examples of this phenomenon. Buffett’s investment firm Berkshire Hathaway has consistently delivered for its shareholders, resulting in many investors across the world looking to replicate the master. In a more modern twist, when Musk changed the Twitter logo to Dogecoin in early April, it sent the cryptocurrency soaring by 30% overnight. However, this is a double-edged sword. Unlike “Reynolds-style” investments, saying too much by influencing the market can lead to a run-in with the regulatory authorities… just as occurred with the purchase of Twitter.
This concept of “celebrity investing” is by no means relegated to the United States. In Spain, for instance, the rich and famous are eager to grow their capital. Formula 1 driver Fernando Alonso is just one celebrity who lends his image to various companies that he has a stake in. An example is the ecological clothing brand Kimoa – a firm he co-founded in 2017. In addition to creating it, he is the public face of the attire.
Gerard Piqué – now famous beyond the world of soccer, thanks to his former partner Shakira – has been a frenetic investor in the world of eSports and online gambling. Rafael Nadal, the tennis champion, is also known for having put money into various haute cuisine restaurants.
When analyzing the investments of the largest fortunes in the Mediterranean country, according to Forbes, a general picture of what famous millionaires spend their money on is obtained. Whether it’s soccer clubs or works of art, their money rarely rests.
“More and more high net worth individuals are doing financial and estate planning. The case of a family with an active business is very different from another [type of individual] who has already sold it. Many aspects are valued, among them, the objectives and the available capital. In the end, the adviser’s recommendation is to dedicate a percentage to one type of asset – such as real estate – and another part to alternative investments, which may include a vineyard, a manufacturing firm, etc. Then, another part [should be] dedicated to financial investments,” explains Carlos Sensat, a Spanish financial advisor.
Regarding which option the richest people tend to prefer among the varied investment menu that managers and advisers put on the banquet table, Sensat says that it varies greatly. According to the expert, there are many big shots who have a large percentage of their wealth in the financial sector – that is, in the stock market. However, little by little, the richest investors have been opening up to alternative ways to obtain passive income.
“In Spain, a large part of the tradition has been [to put your money] in real estate… but after the 2008 crisis, many people realized that property – like stocks – can also suffer ups and downs. The shock had the side effect of improving financial literacy and helped to drive home the importance of diversification,” he notes.
Juan Espel – general director of the Spanish advisory firm A&G – concurs with Sensat. “It’s true that, historically, brick and mortar was the investment par excellent… not only for high net worth individuals, but also for medium and even small investors. But now, in the case of our clients, they’re becoming more and more sophisticated as they look for investment alternatives.”
In addition, fresh arguments have now arrived that emphasize looking beyond property. New rental laws in many developed countries – from Canada to Spain – have made the possibility of buying houses and apartments as investments less attractive, according to Victor Alvargonzález, founder of the financial advisory firm Nextep Finance.
“On the one hand, [these laws] limit the rent that can be collected in certain areas and, therefore, the profitability of the investment… normally in the most attractive neighborhoods and cities for the investor. If we [also consider] inflation and rising property taxes, landlords have to assume even more expenses. Profitability falls.”
In a recent report by the real estate consultancy firm Knight Frank, the evolution of various alternative investment products are classified and ranked. In 2022, art was the undisputed winner when it came to seeking a different refuge from inflation, with the purchase of artworks increasing by 29%. And, over the past 10 years, whiskey has also grown in popularity as an investment.
Espel mentions that, in recent years, there’s been growing interest in the energy sector, especially when it comes to renewables. This has been a large component of a service that his firm offers, in which they act as intermediaries for direct investment in companies. “We usually put our clients in contact with businessmen and entrepreneurs, who present us with attractive and coherent investment opportunities. Often, these opportunities also come to us from our own clients… in that case, we analyze how to make them scalable, so that other clients can invest safely,” he says.
Jaime Medem – investment director of Mirabaud Bank in Spain – explains that, due to the difficult economic situation in 2022, there has been a tendency for high net worth people to put funds aside and opt to buy bonds or fixed income assets directly, in search of stable returns.
“In 2023, the conservative investor is encountering a totally different scenario from that of 2022. An investor can now obtain very attractive rates of return with relatively little risk. This year, many investors are interested in buying bonds directly. Then, there continues to be interest from the part of the most sophisticated and wealthy investors in the creation of venture capital companies. There are a lot of investors who liquidated their portfolios last year due to the situation that occurred – there’s a [big push] to create venture capital firms,” Medem affirms.
He adds that gold is also making a comeback. “We recommend that our clients always keep about 5% of their wealth in gold.”
How do you invest like you’re rich and famous?
Each of the experts consulted provides their own recipe for investing as if you’re wealthy. However, they all mention one common factor: great fortunes tend to have their wealth diversified. Hence, if you want to invest like the rich and famous, you must also seek that diversification. Don’t put all your money in one basket: gold, real estate, investment funds and government bonds are some basic options to consider.
Sensat opines that if you only invest with profitability in mind, it’s easy to make mistakes. “The way of thinking doesn’t differ much between investors by wealth level. What you have to be clear about is the specific objective. For smaller investors, we recommend doing the same financial planning [as wealthy investors]. If the objective is to save for retirement, or for a second residence, or to buy a first home, the important thing is to see what percentage of income must be saved to help achieve this objective. This helps a lot when there’s volatility in the short-term – having a long-term goal offers perspective to help you withstand falls along the way.”
For his part, Espel believes that a good way to diversify with alternative investments is through the use of an FOF – a fund of funds – a pooled investment fund that invests in other types of funds. “This gives us that much-needed diversification…[it also] gives us access to great money managers.”
Finally, Medem emphasizes that high net worth investors are, in fact, quite conservative. “We aren’t venture capitalists – we don’t invest in startups, but in consolidated companies that generate cash.” Although each client is different, Medem advises that no more than 20% of total funds should be placed into alternative investments.
What is the world’s biggest investor up to?
Warren Buffett – known as the “Oracle of Omaha” – is considered one of the most mythical investors of all time. His investment firm – Berkshire Hathaway – is one of the largest in the world by market value, with over $131 billion ready to be invested as of the first quarter of 2023.
It’s possible to analyze the moves that Buffest has made in the past. As of December 31, 2022, Apple accounted for most of the value of the titanic portfolio it manages. Specifically, 38.9%. Bank of America accounted for 11.9%, Chevron for 9.78% and Coca-Cola for 8.51%. The list of companies goes on, with the largest names in the portfolio being American.
In addition to Buffett praising what a good business Apple is, he has warned of the “insanity” of continuing to print so much money, while also comparing the rise of AI with the atomic bomb, given how little we know about the technology. One of his partners – investor Charlie Munger – once described the company’s strategy in blunt terms: “At Berkshire, we have a simple approach to estate planning. Just keep your damn stocks.”
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