Inside the $500 billion family office network

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. subscription To receive future issues, directly to your inbox.

Walmart The stock price is up 25% this year, putting America’s largest retailer on track to reach a $1 trillion market value. At the heart of the stock’s windfall are the Walton family, worth $482 billion according to Bloomberg estimates, and its personal investment firms.

None of the Walton family members — the surviving children and grandchildren of the late Walmart founder Sam Walton — work directly for the retailer, although one serves on Walmart’s board and is chaired by an in-law. But the family still owns a 45% stake in Walmart, and since the start of 2020, the Waltons and their family have sold $25.3 billion in Walmart stock, according to Smart Insider.

As America’s richest family grew wealthier, the Walton family placed its growing wealth in the hands of a network of family offices to make investments and launch foundations.

Walton Enterprises, the family office that owns most of Walmart’s stock, serves as a central hub for the family’s investments and philanthropy. The remainder is held in a family trust managed by Walton Enterprises. The company declined to comment on this story.

Walton’s projects fly under the radar. Few of its investments are disclosed, But public records reveal real estate developments and a $4.4 billion stock portfolio with a conservative mix of ETFs and bond funds.

Big bets on sports teams, artificial intelligence and clean energy companies are left to family members and their individual family offices. For example, Rob Walton, son of founder Sam, bought the NFL’s Denver Broncos for $4.65 billion in 2022 and is worth $137 billion, per Bloomberg. Part of his wealth is managed by private equity firm Madrone Capital Partners, which is the ticket distributor’s largest shareholder. StubHub. His nephew Lucas Walton, who is worth $48 billion, has made $15 billion in impact investing over the past decade or so. From sustainable fuels made from wastewater to bonds that fund ocean conservation, according to his family office, Builders Vision.

However, even as they build their own teams and infrastructure, the Walton family continues to rely on Walton Enterprises for many of its wealth management and philanthropy needs.

Experts say this “hub and spoke” model allows the family to benefit from economies of scale resulting from their combined investments, while also enabling family members to pursue their own ventures.

A family can access top-tier private equity and venture capital funds more easily than they do with smaller individual allocations, according to an adviser familiar with the company’s operations.

“It’s amazing what a billion dollars won’t buy you,” said the consultant, who spoke anonymously because of employer restrictions.

It is a model adopted by the wealthiest families as they seek to benefit from their wealth and access the best investment opportunities, while accommodating the different priorities of the next generation.

Scott Saslow, a family office consultant and director, said he is seeing more families using this strategy and uses it himself. He shares the costs of some services such as accounting with his siblings but manages his own investments in sustainability.

“I think it works best, frankly, when everyone is open about when it makes sense to use centralized resources and when it doesn’t,” Saslow said. “Families are increasingly finding ways to attract the next generation and not be overly paternalistic.”

Lucas Walton, in particular, is part of a growing group of next-generation heirs who are forging a path beyond the family business, said Greg Lemkau, co-CEO of the banking and investment advisory firm BDT & MSD Partners.

“Lucas Walton has really poured his passion into impact,” Lemkau told CNBC. “With the vision of construction, which has a massive scale and huge impact on the oceans, the planet and agriculture, [Lukas] He really had a different impact on something he was passionate about.”

Likewise, Lucas Walton’s cousins ​​Tom Walton and Stuart Walton, through their company RZC Investments, have backed a new mountain biking park near the family’s hometown of Bentonville, Arkansas (which also houses Walmart’s corporate headquarters). His cousin Ben Walton and his wife Lucy Anna use Zuma Capital to support water scarcity and economic development initiatives in Colorado and Chile.

Lucas Walton’s mother, Christy, invests in conservation efforts through her family office, Innovaciones Alumbra. Also known as iAlumbra, the family office oversees an impact fund that supports ocean health, a charitable foundation and environmentally friendly farms. Christie, the widow of Sam’s son John, has an estimated fortune of $22.4 billion, according to Bloomberg.

In some ways, Walton Enterprises resembles a multifamily office serving members of a single family more than a traditional single-family office. Family office involvement allows the Waltons to distribute Costs for services such as tax accounting and property management while using their personal corporation to serve their individual needs.

It’s a model created by the Rockefellers. Since Standard Oil Company founder John D. Rockefeller decided In his family office in the 1880s, his descendants started their own investment and philanthropic companies such as the Venrock and Rockefeller Brothers Fund.

However, it comes with many challenges, especially as families transition from second to third generation, according to family office consultant Dennis Jaffe of BanyanGlobal Family Business Advisors. While second generation family members grew up in the same household and likely share similar values, third generation can be more distant and disparate in their interests.

“To keep a family together from the third generation on, you have to invest time, money and energy to make it happen,” said Jaffe, who has not worked with the Walton family. “You have to want to do it.” “I mean, sometimes these people are difficult, and on top of that, they marry people who can sometimes be even more difficult.”

Jaffe said that an increasing number of families with great wealth are facing this challenge as wealth is passed from generation to generation. The third generation of the family may feel pressure to keep the family office structure intact, but may want to make different investment choices, such as founding AI startups and divesting from oil, he said.

Jaffe, who has studied centenarian families, said most families find compromises between letting the next generation take over and crushing their individuality. For example, instead of setting up a new family office for a third-generation heir, which is expensive, they may choose to create an investment fund for them to manage.

As for the Walton family, the next generation is slowly gaining more power. The grandchildren were granted voting rights over the family’s Walmart holdings a year ago. Some also took over the board of the family foundation, and the $8.6 billion philanthropic causes shifted left.

“The next generation, when they have large amounts of wealth, are less interested in how to create more wealth and more interested in what we do with it,” Jaffe said. “It’s not necessarily a political shift because it’s a different level of looking at the world. You’re looking forward. If you’re an older person, you look at what you’ve done and you celebrate yourself to a certain degree and you feel very satisfied and very confident.”