Donald Trump's investment portfolio a messy hodgepodge: advisers

New disclosures by the GOP presidential candidate reveal an unclear money-management strategy, say advisers.

Jul 23, 2015 @ 2:12 pm

By Trevor Hunnicutt

+ Zoom
(Bloomberg News)

Presidential hopeful and real estate mogul Donald J. Trump's investment portfolio reveals a scattered approach to money management, with a collection of hedge funds, stocks and cash across brokerage accounts.

A new 92-page report provides a window into the sprawling Trump empire, which includes the Donald J. Trump Revocable Trust, Trump World Publications, Trump Ocean Manager Inc. and DT Dubai II Golf Manager, in addition to golf clubs, vineyards and a private jet operation.

The statement of finances also itemizes scores of investments held at brokerage firms operated by Deutsche Bank AG, Barclays Bank PLC, Oppenheimer & Co. Inc. and JPMorgan Chase & Co. Mr. Trump appears to keep a good majority of his financial assets in blue-chip stocks, a good amount in hedge funds and relatively little in traditional bonds.

BARBELL APPROACH

“An adviser might call this a barbell approach, heavy on the aggressive end with individual stocks and heavy on the conservative end with cash but not much for balance in the middle,” said Gary Brooks, an adviser at Brooks, Hughes & Jones, in Tacoma, Wash., who reviewed Mr. Trump's disclosure report. The portfolio appears to have minimal exposure to small stocks, international equities and bonds, he said.

“It might not be the model of a prudent portfolio from a fiduciary stewardship standpoint but that doesn't seem to be what we should expect from the character of Trump. … Like a lot of people, there are many pieces to his investment puzzle but even he couldn't tell you what the cohesive strategy is for it all. He has a collection of investments rather than a portfolio built on purpose to align with a goal.”

A spokeswoman for Mr. Trump's presidential campaign, Hope Hicks, did not respond to a request for comment.

Mr. Trump, 69, displays an affinity for hedge funds and other similar alternative investments. His largest stake is in BlackRock Inc.'s Obsidian Fund, an unconstrained fixed-income product, in which he claims a stake of between $25 million and $50 million. That product pays more than $1 million in interest, dividends and capital gains a year, according to the disclosure. Mr. Trump also has stakes in funds managed by Angelo, Gordon & Co., John Paulson and MidOcean Partners.

(See all of Donald Trump's Top 5 funds)

When it comes to mutual funds, he appears to have a favorite brand: the mutual funds produced by Baron Capital Group. Mr. Trump disclosed owning 11 of the firm's products worth at least $7.6 million. Tyler Bradford, a spokesman for the mutual fund company, declined to comment.

“Baron surprises me,” said Bob Pugh, president of Insight Wealth Management, based in Gainesville, Va. “They have expense ratios over one percent and haven't performed as well as cheaper ETFs, at first glance. Why would Trump put money in something like that?”

BILLIONS IN REAL ESTATE

The disclosure shows billions in real estate and other assets that appear to more than balance against hundreds of millions in mortgage debts. The form is not entirely clear, however, providing only broad ranges of asset values and debts.

Calculating from the low end of the broad categories of value that the form provides, Mr. Trump is claiming a net worth of at least $1.35 billion in his companies and real estate holdings plus at least $70.5 million in liquid assets. He also has more than $265 million in liabilities.

Given that wealth, the placement of Mr. Trump's investments may not matter.

“Asset allocation doesn't matter as much for him,” said Chad Carlson, wealth manager at Balasa Dinverno Foltz. “Unless he's spending a monstrous amount, he can be zero percent stocks or he can be 100% stocks. … Do what you want, Donald.”

Another adviser, who asked not to be named for fear of making a wealthy enemy, said an extremely moneyed investor could do without a heavy bond exposure.

But Ted Jenkin, founder of oXYGen Financial Inc. in Alpharetta, Ga., said a man of Mr. Trump's age and liquidity profile could benefit from bonds that pay a fixed interest rate.

Beyond investments in financial markets, some advisers identified issues with the structure of Mr. Trump's businesses.

Lee DeLorenzo, president of United Asset Strategies Inc. in Garden City, N.Y., said it was unusual that Mr. Trump's financial asset did not include off-shore trusts or private placement life insurance, a contract often used in planning for wealthy individuals.

Among the surprises in the disclosures: Mr. Trump is a union man. His financial disclosure form shows the real estate mogul turned reality TV star collecting a pension of $110,228 courtesy of the Screen Actors Guild. His wife, Melania, made at least $100,000 from her skin care line.

It's nearly impossible from the federal forms to determine whether Mr. Trump — as he has claimed — is worth more than $10 billion. His claims about the size of his wealth have fluctuated over the years and sometimes have been based on little other than his own estimation of the value of his own brand.

23 ASSETS WORTH MORE THAN $50 MILLION

The Federal Election Commission isn't going to solve that mystery. That's because any asset worth more than $50 million gets counted the same, and Mr. Trump is claiming 23 of those, such as his aircraft, the Mar-A-Lago Club in Palm Beach, Fla., and a golf course in Scotland.

Like Jeb Bush and Hillary Clinton, Mr. Trump also thrived on the speaking circuit. His biggest fee — three $450,000 appearances in less than a year for ACN Inc., a multilevel marketing company that recruits people to sell communications services to their friends and acquaintances.

What hasn't been going so great for Mr. Trump, his personal financial disclosure filing revealed, are his book sales. His 2004 book, “Think Like a Billionaire,” generated less than $201 in royalties in the period covered by the form, which lists income since the beginning of 2014. His 1987 tome, “The Art of the Deal,” fared better, with up to $50,000 in royalties.

All candidates for federal office are required to file the personal financial disclosure forms with the government, and Fox News has made the disclosures a qualifier for its Aug. 6 debate, the first nationally televised match-up of the contenders for the Republican presidential nomination.

The disclosures are also a reminder that Mr. Trump had some financial cushion from his parents. His father, Fred, was a real estate developer who amassed enough money — and an estate-planning strategy — by 1976 to create trusts for his children including Donald and grandchildren, according to the disclosures. Donald's father's estate had been estimated at $250 million to $300 million, according to a New York Times obituary in 1999.

The filing shows the candidate has a key role in overseeing the family money. He's listed as a trustee for the seven 1976 trusts and since 1997, three more family trusts including two connected to his sisters Elizabeth and Maryanne.

Mr. Trump is also a trustee of two trusts for grandchildren in the family. The disclosures don't break out the holdings of these entities, as other candidates such as Mitt Romney have done in the past.

Bloomberg News contributed to this report.

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