The Hedge Fund You Never Heard About
Gary Wipfler
“Apple created this wholly owned subsidiary for two main reasons: to manage its growing cash pile and, much to the chagrin of embattled Governments, to avoid taxes.” Just who Is Braeburn Capital?
Apple nominated its Treasurer, Gary Wipfler, as one of Braeburn’s principals and CIO who then hired additional portfolio managers.
Braeburn was incorporated in 2006 to manage the assets of, you may have already guessed? Yep, the goliath that is Apple. Braeburn is really just another cultivar of Apple as the Macintosh & iPad were. The connection between the companies shouldn’t come as a surprise.
How Well Is Braeburn Managing Assets?
Apple created this wholly owned subsidiary for two main reasons: to manage its growing cash pile and, much to the chagrin of embattled governments, to avoid taxes. Instead of returning the excess cash to shareholders in the form of dividends, or buying back its own stock, Apple decided it could create the biggest hedge fund in the world; one that has just one client and is entirely dedicated to it. With offices in Palo Alto, California, Apple decided to incorporate Braeburn in Reno, Nevada. At first, you’d be forgiven for thinking that they may have been weighing the possibility of investing the money in casinos. Not so, what led the company to Reno was a tax reason. In Nevada, there are no corporate income taxes & no capital gains taxes and, amazingly, the state doesn’t share info with the Internal Revenue Service (US IRS)! In California, state taxes are around 9%. So, Braeburn setting up in Reno fulfilled a key requirement: it provided a perfect legal environment to manage its ever growing cash pile.
First of all, let’s be clear about this. Unlike other hedge funds, no matter how poorly Braeburn manages money, they have effectively unlimited lives. Apple is perhaps the world’s most successful private enterprise and as a consequence a phenomenal cash cow. In fact, Apple makes money so fast that Braeburn likely struggles to deploy it efficiently. In 2006, when Braeburn was incorporated, Apple’s cash and marketable securities were around $10bn. In 2007, it grew to $18.5bn, and so on until, at the last count, it reached the $120.2bn level. And continues to rise...
“Apple is perhaps the world’s most successful private enterprise and as a consequence a phenomenal cash cow. In fact, Apple makes money so fast that Braeburn likely struggles to deploy it efficiently.”
February 2013
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