Cascade Investment LLC – The Secret Holding Company of Bill Gates

When you hear the name Bill Gates, what do you think?  Microsoft.  At least, that is what comes to mind for most people.  It makes sense.  After all, Bill Gates owns 620,973,551 shares of Microsoft.  At today’s market price of $24.38 per share, this puts the pre-tax value of his holdings in the software giant at $15,139,335,173.  It alone – $15 billion – would get someone near the top portion of the Forbes 400 list.

Bill Gates has also given away more than $23 billion, mostly to the Bill & Melinda Gates Foundation.  It is estimated that it has saved more than 5 million lives from malaria, other diseases, and HIV thanks to its prevention and education initiatives.  Five million people who would be dead are now alive because of that gift.  It is awesome in every way.

But, with Gates having an estimated net worth of $51+ billion, where is the other $36 or so billion dollars of his wealth?  It must be invested somewhere, as you learned in the article on where rich people park their money.

Virtually all of it is held within a firm known as Cascade Investment LLC, which is the successor to Dominion Income Management, the former private holding company of Bill Gates.

What Is Cascade Investment LLC?

Put simply, Cascade Investment LLC is the secretive private holding company of the software mogul.  Nearly every day the stock exchange has been open for 20+ years, Bill Gates has sold off as much Microsoft stock as he can without lowering the price of the stock, paid the taxes, and transferred a portion of the proceeds to this holding company.  Michael Larson, a well respected, successful value investor manages it on a full-time basis from the Kirkland, Washington headquarters.

In some ways, Cascade Investment LLC is a bit like a smaller version of Berkshire Hathaway, only with Bill Gates and his family as the primary shareholders.

[mainbodyad]In fact, Cascade Investment LLC owns hundreds of millions of dollars worth of Berkshire Hathaway shares!  At the time I wrote this post, Bill Gates himself sat on the board of Berkshire Hathaway.

A Glimpse At Some of the Known Investment Positions of Cascade Investment LLC

Some of the Wikipedia contributors have gone through the disclosure documents filed with the SEC by Cascade Investment LLC and come up with a list of its investments in public companies:

• Berkshire Hathaway
• Canadian National Railway
• Carpetright
• Dante Giovanni Corporation
• Coca Cola Femsa SAB de CV – 20% stake
• Cox Communications
• Microsoft Corporation
• FEMSA (Mexican brewer) – $364 million (Dec. 2007) – 1.2 percent of FEMSA capital through “B” shares. Cascade might thus own 10.81 million of Femsa’s New York-traded American Depositary Shares, about 3 percent of Femsa, the world’s second largest Coke bottler and Mexico’s second-largest brewer.
• Four Seasons Hotels and Resorts – 42.5 percent
• ICOS
• Newport News Shipbuilding
• Otter Tail Power Company
• Pan American Silver Corporation
• Republic Services, Inc – U.S. waste management – 20% estimated^[6]
• Sapphire Energy
• Schnitzer Steel Industries
• Scient
• Televisa
• Wisconsin Central Transportation

The Role of a Private Investment Holding Company

Once you have sufficient assets, it is incredibly easy to establish a private investment holding company. In most cases, due to certain tax rules that penalizes reinvesting earnings in regular corporations, modern investors prefer limited liability companies.

[mainbodyad]All it takes is some paperwork filed with your secretary of state, a few hundred dollars in filing fees, and a good operating agreement. Then, you can open brokerage accounts in the name of your limited liability company, create subsidiaries to hold real estate investments, such as to build an office complex in your hometown, or to hold your collection of rare art.

Of course, you will have to figure out how to grow the net worth of your private investment holding company to $36+ billion.