Inside the $500 billion web of family offices

A version of this article originally appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. become a member to receive future editions straight to your inbox.

Walmart Shares have soared 25% this year, helping America’s largest retailer reach a market cap of $1 trillion. At the center of the stock windfall is the Walton family, worth $482 billion. Bloomberg’s estimateand personal investment firms.

None of the Waltons, the surviving children and grandchildren of Walmart founder Sam Walton, work directly for the retailer, but one of them serves on Walmart’s board of directors and his father-in-law also chairs the board. But the family still owns a 45% stake in Walmart, and since the beginning of 2020, the Waltons and the family foundation have sold $25.3 billion in Walmart stock, according to Smart Insider.

As America’s richest family grew richer, the Waltons turned their growing wealth over to a network of family offices to invest and establish foundations.

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

Walton Enterprises is flying under the radar. Very few of their investments have been disclosed, but public records reveal real estate developments and a $4.4 billion stock portfolio consisting of a conservative mix of ETFs and bond funds.

Big bets on sports teams, artificial intelligence startups and clean energy are left to family members and their individual family offices. For example, Rob Walton, son of founder Sam, purchased the NFL’s Denver Broncos for $4.65 billion in 2022, valuing it at $137 billion, per Bloomberg. Part of his fortune is managed by private equity firm Madrone Capital Partners, the ticket seller’s largest shareholder. StubHub. His nephew, Lukas Walton, who is worth $48 billion, has made $15 billion in impact investments over the past decade. They range from sustainable fuel derived from sewage to bonds that finance ocean conservation, according to family office Builders Vision.

Even as they build their own teams and infrastructure, the Waltons continue to rely on Walton Enterprises for many of their wealth management and philanthropic needs.

This “hub and spoke” model allows the family to benefit from the economies of scale created by their pooled investments, while also allowing family members to pursue their own projects, experts say.

The family has easier access to top private equity and venture capital funds than individually through smaller allocations, according to an advisor familiar with the company’s operations.

“It’s surprising what a billion dollars can’t buy you,” said the consultant, who spoke anonymously due to restrictions from his employers.

This is a model that more ultra-rich families are adopting as they seek to grow their wealth and access the best investment opportunities, while also taking into account the different priorities of the next generation.

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

“Honestly, I think it would work best if everyone was clear about when it makes sense to use centralized resources and when it doesn’t,” Saslow said. “Families are increasingly finding ways to attract the younger generation and not be too paternalistic.”

Lukas Walton, 39, in particular, is part of a growing group of next-generation heirs charting a path outside the family business, said Gregg Lemkau, co-CEO of banking and investment advisory firm BDT & MSD Partners.

“Lukas Walton really poured his passion into making an impact,” Lemkau told CNBC. “With the Builders’ Vision having enormous scale and impact on oceans, the planet and agriculture, [Lukas] It really makes a different impact on something that gives him passion.”

Similarly, Lukas Walton’s cousins, Tom Walton and Steuart Walton, have backed a new mountain bike park near the family’s hometown of Bentonville, Arkansas (also home to Walmart’s headquarters), through their company RZC Investments. Cousin Ben Walton and wife Lucy Ana use Zoma Capital to support water scarcity and economic development initiatives in Colorado and Chile.

Lukas Walton’s mother, Christy, invests in conservation work through her family office, Innovaciones Alumbra. The family office, also known as iAlumbra, manages an impact fund, a charitable foundation and environmentally friendly farms that support ocean health. Christy, the widow of Sam’s son John, is worth an estimated $22.4 billion, according to Bloomberg.

In some ways, Walton Enterprises is more like a multi-family office serving members of a single family than a traditional single-family office. Sharing a family office allows the Waltons to distribute costs of services such as tax accounting and property management when using their personal firms to meet their individual needs.

A model pioneered by the Rockefellers. Since John D. Rockefeller, founder of Standard Oil established His descendants, who became his family office in the 1880s, founded their own firms for investment and philanthropy, such as Venrock and the Rockefeller Brothers Fund.

However, this presents many challenges, especially as families move from the second to the 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, the third generation may be more distant and different in their interests.

“To keep the family together through the third generation, you have to put in the time, money and energy to make it happen. You have to want to do it,” said Jaffe, who has not worked with the Waltons. “I mean, sometimes these are difficult people, and in addition to that, sometimes they marry people who can be even more difficult.”

An increasing number of high-net-worth families are facing this challenge as wealth is passed down from one generation to the next, Jaffe said. The third generation of a family may feel pressure to keep the family office structure intact but may want to make different investment choices, such as establishing artificial intelligence startups and exiting oil, he said.

Jaffe, who studied 100-year-old families, said most families found a compromise between letting the next generation take the reins and crushing their own individuality. For example, instead of establishing a new family office for the third-generation heir, which is costly, he said, they may prefer to create an investment fund that they will manage themselves.

As for the Waltons, the new generation is slowly gaining more authority. The grandchildren were given voting rights over the family’s Walmart holdings a year ago. Some also took over the family foundation’s board, and the causes of the $8.6 billion philanthropy shifted left.

“The next generation, when they have a lot of wealth, they’re less interested in how they can get more wealth and more concerned with what do we do with it,” Jaffe said. “It’s not necessarily a political change because it brings a different perspective on the world. You look forward. If you’re a senior, you look at what you’ve done and you celebrate yourself to a certain degree and you feel very fulfilled, very confident.”