Putt for dough, invest long term
Putt for dough, invest long termPublished October 3, 2011
When it comes to managing his financial portfolio, Luke Donald, as in his golf game, is no bomber off the tee. Instead, the world’s No. 1-ranked golfer has an investment strategy that reflects his style of play: controlled, steady and precise.
“I’m low-risk and fairly conservative, but I also have a very competitive streak and I don’t like to lose money I earned on the course,” Donald said.
The 33-year-old British golfer has had a breakthrough year on the course, and while he didn’t win the FedEx Cup, his $5.8 million in prize money has put him atop the PGA Tour in total earnings this year. Since he began playing in 2001 he has made $25 million in total earnings on the PGA Tour, on top of the millions of dollars he has earned playing in international events along with income from marketing partnerships with RBC, Polo Ralph Lauren, Rolex, Mizuno, Titleist and FootJoy.
“If I can get a 5 percent return in this market, I am happy. I don’t need to take big risks.”
So Luke Donald is a very rich man, and while he has focused on being the best at his craft, he has also taken a consistent approach in securing his financial future.
Talking with Donald on a recent morning at a Chicago-area golf club where he had just finished playing with a group of members in a fundraising outing, one gets the sense of his low-key approach. There is no entourage. Only his college coach and good friend Pat Goss accompanies Donald off the course.
But his calm demeanor belies the crush of new business opportunities that have come Donald’s way during his ascension to the top of golf’s world rankings.
“The strategy hasn’t changed much since I started with Luke 10 years ago, but what has changed is the volume of interest in the past 12 to 18 months,” said Jon Wagner, co-managing director, IMG Golf Americas, who is Donald’s marketing agent. “But the structure of his business and who he wants to align himself with, none of that has changed. He has never done anything for short-term gain.”
Donald has been with IMG, which handles his tour responsibilities and off-course endorsements, since 2001. Wagner and Donald talk at least once a week, with Wagner running point on most off-the-course business matters
“The last call we had was about 16 items on the list ranging from corporate stuff to new deals to a new iPhone app,” Donald said.
On the endorsement front, there is room for growth. “The plan is to add one more blue-chip company with a global footprint,” Wagner said.
Along with Wagner, Donald shapes his portfolio by leaning on a small, close-knit circle of financial managers and advisers who have been doing business with him since he turned pro 10 years ago after graduating from Northwestern University with an art degree.
His main business interests are divided into three areas of operation.
Donald’s U.S. investment portfolio is managed by MAI Wealth Advisors, a Cleveland-based company once owned by IMG’s late founder, Mark McCormack. MAI became independent from IMG in 2004.
Donald’s overseas portfolio is managed by Partners Capital in London, while IMG handles Donald’s marketing and endorsement business.
Also included in Donald’s financial inner circle is his brother-in-law Robert Ellis, a highly successful steel industry executive in the United Kingdom. Ellis, who is married to Donald’s older sister, is a close business confidant, providing another trusted sounding board for Donald’s business affairs.
Within the structure is a firewall between his financial portfolio and marketing efforts to avoid conflicts of interest. IMG handles all of Donald’s appearances, endorsements and media requests, but is completely hands-off with Donald’s financial portfolio.
“[Donald’s investments and marketing portfolio] is all done very separately but under the same strategy, which is that Luke is very blue chip and is the CEO,” Wagner said. “Luke is extremely involved in both his partnerships and his portfolios. Once the money moves, we have nothing to do with it.”
Business and marketing opportunities first are vetted by Wagner, who decides whether they fit into Donald’s preference for a risk-averse strategy that in the past year has become as much about the preservation of wealth as the generation of wealth.
At least once a quarter, Donald meets with his two investment companies to reassess his portfolio balance, which is structured to include a blend of about 40 percent equities and 40 percent non-equities such as bonds, with the remaining 20 percent balance coming from nontraditional investments (see sidebar). There is no real estate in Donald’s portfolio with MAI, and there is little investment in private equity and hedge funds.
There are five to six employees handling Donald’s MAI financial dealings out of Cleveland, led by company director John Ciancibello. The company represents other athletes but would not disclose its client list.
“Luke’s risk tolerance is low to moderate,” Ciancibello said.
Donald’s equity portfolio is globally diversified with a growing focus on emerging markets in China, India and Latin America. On the non-equity side, Donald’s focus is on fixed-income investments such as tax-exempt municipal bonds.
Gone are the days when Donald expected double-digit returns during the bull market.
Donald, with wife Diane and daughter Elle, aligns his investments with his personal interests, including a wine label.
Propose a business deal or investment with Donald and don’t expect a quick answer.
“Very rarely do you get an answer on the spot,” Wagner said. “And most of the time Luke bounces it off Diane.”
Diane is Donald’s wife, who also is closely involved in his off-the-course dealings. The two met at Northwestern University, where Diane earned a journalism degree.
“She gets the whole brand association and is very tuned in to it,” Wagner said.
Donald’s business investments are also closely aligned with his
His first major investment play followed the path of plenty of athletes: a wine label. In 2008, he rolled out his Luke Donald Collection label in a partnership with Terlato Wines International. Donald went into the business with Bill Terlato, and the label produces about 2,500 cases each year.
Donald put in no up-front money. Instead, his deal calls for him to get an undisclosed percentage of sales of the bottles priced around $40. Donald actively markets his label, routinely holding tastings while out on tour to promote the brand. The company is selling most of its cases produced each year, generating an estimated $1.2 million annually in retail sales.
But Donald wasn’t about to slap his name on the label without much input into the product.
He traveled to Napa Valley on numerous occasions to help select and blend the grapes to create his Chardonnay and Claret wines that are now sold in Four Seasons Hotels and various restaurants and at retail.
He also secured one more key aspect as part of his investment in the business: an option to buy the vineyard.
Taking equity stakes in his business ventures is becoming an increasing part of his long-term approach.
“Getting equity, that is more important now and it is more prevalent now with the market,” Donald said.
As balanced and blue-chip-focused as Donald structures his financial portfolio, he also has a entrepreneurial streak. Consider that one of his latest investments is in a car-sharing business targeted at college students who can pay to use cars by the hour. It is a partnership with a friend, even though Donald is selective about mixing money with friends and family.
“I like to look for different opportunities,” Donald said. “But there are lots of people close to me asking for money, and it can change relationships.”
Donald also is beginning to try his hand in the golf course design business, with his first effort in the industry being a course in Vietnam. The course is owned by a private developer who hired IMG’s golf course design division and Donald, who received a six-figure fee to create the layout for an undisclosed fee.
Donald says taking equity stakes in business ventures is becoming an increasing part of his long-term approach.
Though he has no investment stake in the course, the level of its success will affect his future as a golf course designer. It is a skill that is a natural extension of Donald’s artistic talents. He still paints and collects, but only “if it fits the space.”
“Having artistic background is a big help in maybe being more visual than some of the other guys,” Donald said. “Being somewhat of a traditional player, I think course design has gone the wrong way. I don’t think making a long course some 7,500 or 8,000 yards is a great way to design a course.”
The Ba Na Hills Golf Club won’t open until late next year, but Donald, as with most everything else he aligns himself with, will put his own stamp on the development and get very involved in the business.
Consider that after he helped his Europe team win the rain-delayed 2010 Ryder Cup in Wales, Donald spent the night after celebrating with his teammates and then spent the next two days at an RBC outing where, exhausted, he held up his end of a business agreement with two days of corporate golf along with meet and greets with company executives.
“He isn’t just putting his name on and walking away. That isn’t what he does,” Wagner said.