EFTA02627821

From: David Stern Sent: Friday, January 18, 2019 6:12 AM To: Jeffrey Epstein Subject: Bond Fund Can you check if this is of interest to Rothschild? Discussing it now with Pictet and Julius Baer. I can start this with US$ 50m (ICM, Taiwan family) and feel confident =ther families will follow us quickly. Thanks David The problem - Large family offices are increasingly managing their own wealth. - Chinese family office wealth is largely first generational. - Do not trust outside parties much and want direct control of their =ssets - Do not understand that institutionalized asset management cannot turn =n a dime and move in and out. - Do not like funds because assets locked up, no visibility, and no real =ontrol once funds have been deployed. - Do not like paying fees. - Want steady return through bonds but do not want to give up =lexibility, control and transparency. The solution - Create a bond fund at Rotschild that large family offices could assign =und managers specific for their pool of capital. Rotschild would get the fund managers along with the client to make =ure they are up to par. - Family office would get the benefit of Rotschild funding, trading =latform and bond access. - Family office would have visibility into the bonds and some control on =und manager. - As the bond fund would be essentially a Rotschild product under =otschild risk guidelines and management, should be leveragable. This is =mportant because it means the cash isn't stuck and can be =everaged against as the family office needs and thus preserves =lexibility. This isn't super different from existing bond fund =hich are also leveragble. The key difference is that the fund manager =s assigned over by family office and the transparency, mandate, risk =evel is clear to the family office. Basically, incentive of family =ffice is more aligned. - As this bond fund is a Rotschild product, other families should be =ble to subscribe to the bond fund as well. What is the benefit to Rotschild? - Increased AUM from family office putting a $50 minimum onto the =latform to trade bonds. - Increased fee flow as Rotschild would essentially be charging fees on =he bond trades. As it is bonds it would be more the bid ask spread but =hould still provide bond desk with more flow - Lending for trades would be locked to Rotschild. More lending fees. - Base platform fee on large AUM. (0.3-0.5%?) - Family offices would undoubtedly recommend their employees, friends, =ompanies to invest in their "bond fund" as it would be =E2$4safer" leasing to even greater AUM and all the above =enefits. Practicality points - ICM is looking with a few banks to do exactly the above and has 4 year =rading experience as a licensed hedge fund with track record. - ICM is looking to do 50-150 min In said platform. EFTA_R1_01843592 EFTA02627821 ICM would want to do this because family funds are scattered in =ifferent companies and accounts and this allows for centralization in a =ay a hedge fund cannot easily allow. (EX: when it is not a Rotschild =ond fund for example the family has to keep funds at the private bank =nd at the hedge fund leading to inefficient use of capital. Much =impler to have all the funds at the private bank invested in a private =ank product; however, we would not do so because 1) fees are too high; =) insufficient transparency; 3) leverage not as good; 4) in short =rivate bank is much inferior to owning a hedge fund platform =ntentionally to gouge clients. In the past this was fine but with 2nd =en having worked at the banks, we just set up our own platforms now. We =ust keep minimums at banks necessary to keep it open and trade =Isewhere which is a big loss to Banks. For reference, ICM across hedge =und equities and bonds pays around 1.5 a year on fees. - ICM family side would want to pool corporate capital into this. Cannot =ool into hedge fund. Currently capital pooled into commercial banks =hich makes us a lot less and bad service for investment management. - In short, ICM aren't the only ones with this problem. Would =ike to setup biz around this - there is demand and i can bring others =wiftly. <?xml version=.0" encoding=TF-8"?> <!DOCTYPE plist PUBLIC "-//Apple//DTD PLIST 1.0//EN" "http://www.apple.com/DTDs/PropertyList-1.O.dtd"> <plist version=.0"> <dict> <key>conversation-id</key> <integer>330617</integer> <key>date-last-viewed</key> <integer>0</integer> <key>date-received</key> <integer>1547791940</integer> <key>flags</key> <integer>8590195713</integer> <key>gmail-label-ids</key> <array> <integer>2</integer> <integer>6</integer> </array> <key>remote-id</key> <string>891753</string> </dict> </plist> 2 EFTA_R1_01843593 EFTA02627822