The Hidden Flaw in ‘Passive Investing’ — And What Wealthy Families Do Instead

Key Concepts

Fractional Family Office: Crescent Asset Management’s business model, providing comprehensive wealth management services tailored to CEO founders and ultra-high-net-worth individuals.
Time Horizon-Based Allocation: A portfolio construction approach prioritizing cash flow needs over traditional asset class allocations, dividing capital into liquidity, income, growth, and aspirational strategies.
Founder-Led Companies: An investment thesis focusing on publicly traded companies led by their founders, leveraging behavioral and performance advantages.
Lifetime Capital Needs vs. Wealth Surplus: Distinguishing between committed capital for lifestyle maintenance and discretionary capital for broader goals like impact investing.
Double Barrel Policy Stimulus: A predicted combination of fiscal incentives and potential monetary easing (rate cuts or QE) in 2026.
Purchasing Power Parity (PPP): Using metrics like the Big Mac Index to assess currency valuations.

Investing with Founders and Beyond: A Conversation with Jack Aban of Crescent Asset Management

This episode of the Met Faber Show features Jack Aban, CIO of Crescent Asset Management, discussing their unique approach to wealth management and investment strategies. The conversation centers around serving ultra-high-net-worth individuals, particularly CEO founders, and navigating the current market landscape.

Crescent Asset Management: A Founder-Focused Model

Jack Aban detailed the origins of Crescent Asset Management, founded in late 2017 with zero assets under management. The firm’s core concept is a “fractional family office” specifically designed for CEO founders – individuals who have built businesses, often in private equity or real estate. This client base, typically in their 40s, 50s, and 60s, represents a demographic shift from traditional private banking clients. The firm’s ownership structure reflects this client-centric approach: employees own 60%, clients 30%, and outside institutional partners 10%, with current assets under management totaling $76 billion.

A Time Horizon-Driven Investment Framework

Crescent’s investment philosophy prioritizes “immunizing clients’ lifestyles from the vagaries of the market.” This is achieved not through traditional asset allocation based on stocks, bonds, and commodities, but by aligning portfolios with clients’ cash flow needs and time horizons. The firm divides portfolios into four strategies:

Liquidity Strategy (0-3 years): Focused on immediate cash flow needs.
Income Strategy (3-7 years): Generating cash flow for medium-term goals.
Growth Strategy (7-15 years): Targeting capital appreciation over a longer timeframe.
Aspirational Strategy (15+ years): Dedicated to long-term goals like generational wealth transfer, philanthropy, and impact investing.

This framework further distinguishes between “lifetime capital needs” (committed capital) and “wealth surplus” (discretionary capital), allowing for tailored investment approaches.

Beyond Traditional Asset Allocation: The Role of Founder-Led Companies

Aban discussed Crescent’s approach to public equities, which is generally passive but incorporates factor tilts. One key tilt is a focus on companies led by their founders. Statistical analysis revealed that publicly traded companies run by their founders demonstrate a performance advantage, adding approximately two percentage points annually to returns. This advantage stems from founders’ risk-taking tendencies, strong commitment to the company (often holding significant equity – e.g., Alex Karp of Palantir owning nearly half the stock), and alignment of interests.

However, Aban cautioned against simply creating a basket of founder-led companies, emphasizing the importance of a well-constructed index portfolio as a foundation. He noted that the effect is more pronounced in smaller cap stocks (S&P 600 and 400) to avoid bias from mega-cap companies like Nvidia, Meta, and Tesla. The firm tracks founder leadership monthly and adjusts portfolios upon a founder’s departure, citing research showing a significant performance difference (2-3x annualized return) between founder-led and successor-led companies. He also noted the similarity to family-led companies, though the effect is less pronounced in public markets.

Macroeconomic Outlook and Investment Positioning (2026)

Aban outlined a potential “double barrel policy stimulus” for 2026, combining fiscal incentives from the “big beautiful bill” with potential monetary easing from the Federal Reserve. He anticipates a dovish shift in Fed policy following Chairman Powell’s departure in May, potentially including quantitative easing or “operation twist” to lower Treasury yields and unlock the housing market.

This outlook leads Crescent to favor small-cap stocks, particularly “junk” stocks, and value stocks as the market broadens. He also highlighted the undervaluation of the Japanese Yen, citing purchasing power parity and the potential for a rebound as Japanese yields rise.

Private Markets and Alternative Investments

Crescent leverages its access to private markets, believing they offer opportunities for “alpha” generation. The firm focuses on pre-IPO investments and co-investments, particularly with venture capital firms. They recently shifted their real estate allocation towards debt due to favorable financing conditions and are involved in opportunity zone investments, awaiting new maps to be released in 2026.

Memorable Investment Experience

Aban shared a memorable experience from his early career as a mortgage-backed securities trader, where he developed a proprietary option-adjusted spread model that allowed him to outperform competitors significantly before the widespread availability of similar tools.

Resources and Contact Information

Listeners can find more information about Crescent Asset Management at crescentcapital.com or contact Jack Aban directly at jababin@crescentcapital.com.

Notable Quote:

“Investing for individuals and families, our main goal is really to immunize our clients lifestyle from the vagaries of the market. And so we try to commit as as little capital as possible to have the highest degree of success in delivering on those lifestyles.” – Jack Aban.

Technical Terms:

Option-Adjusted Spread (OAS): A measure of the spread between the yield on a bond and the yield on a risk-free benchmark, adjusted for the embedded options in the bond.
Quantitative Easing (QE): A monetary policy tool where a central bank purchases assets to increase the money supply and lower interest rates.
Operation Twist: A monetary policy tool where a central bank sells short-term securities and buys long-term securities to lower long-term interest rates.
Purchasing Power Parity (PPP): A theory that exchange rates between currencies should adjust to equalize the purchasing power of those currencies in different countries.
Prepayment Model: A model used to forecast the rate at which homeowners will repay their mortgages early.

This conversation provides a unique perspective on wealth management, emphasizing a client-centric, time-horizon-driven approach and highlighting the potential advantages of investing in founder-led companies and exploring opportunities in undervalued currencies and private markets.