Inside the $500 billion web of family offices

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Walmart stock has soared 25% this year, putting America’s largest retailer on track to a $1 trillion market cap. At the center of stock windfall is the Walton family, worth $482 billion by Bloomberg’s estimate, and their personal investment firms.

None of the Waltons — the surviving children and grandchildren of late Walmart founder Sam Walton — work directly for the retailer, though one serves on Walmart’s board and an in-law chairs it. But the family still holds a 45% stake in Walmart, and since the start of 2020, the Waltons and their family trust have sold $25.3 billion in Walmart stock, according to Smart Insider.

As America’s richest family has gotten richer, the Waltons have put their growing wealth in the hands of a network of family offices to make investments and launch foundations.

Walton Enterprises, the family office that holds most of their Walmart shares, acts as the central hub for the family’s investments and philanthropy. The rest is held in a family trust that is managed by Walton Enterprises. The firm declined to comment for this story.

Walton Enterprises flies under the radar. Few of its investments are disclosed, but public records reveal real estate developments and a $4.4 billion stock portfolio with a conservative mix of ETFs and bond funds. 

Buzzy bets on sports teams, artificial intelligence startups and clean energy are left to the family members and their individual family offices. For instance, Rob Walton, son of founder Sam, bought the NFL’s Denver Broncos for $4.65 billion in 2022 and is worth $137 billion per Bloomberg. Part of his wealth is managed by private equity firm Madrone Capital Partners, which is the largest shareholder of ticket reseller StubHub. His nephew Lukas Walton, worth $48 billion, has made $15 billion in impact investments over the last decade or so, ranging from sustainable fuel made from sewage to bonds that fund ocean conservation, according to his family office Builders Vision.

Yet even as they build out their own teams and infrastructure, the Waltons continue to rely on Walton Enterprises for much of their wealth management and philanthropy needs. 

Experts say 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. 

The family is able to access top-tier private equity and venture capital funds more easily than they would with individual smaller allocations, according to an advisor familiar with the firm’s operations.

“It’s amazing what a billion dollars won’t buy you,” said the advisor, who spoke anonymously due to restrictions from their employer.

It’s a model more ultra-wealthy families are adopting as they seek to leverage their wealth and access to top investment opportunities, while also accommodating the different priorities of the next generation. 

Scott Saslow, a family office consultant and principal, said he sees more families using this strategy and employs it himself. He shares the costs of some services like accounting with siblings but manages his own sustainability investments.

“I think it works best, honestly, when everyone is open about when it makes sense to use central resources and when it doesn’t,” Saslow said. “Families are increasingly finding ways to draw the next gen in and not be too paternalistic.”

Gregg Lemkau, co-CEO of bank and investment advisory firm BDT & MSD Partners, said 39-year-old Lukas Walton, in particular, is part of a growing cohort of next-generation heirs, who are forging a path outside the family business.

“Lukas Walton has really poured his passion into impact,” Lemkau told CNBC. “And with Builders Vision, which has massive scale and impact on oceans and the planet and agriculture, [Lukas] is really having a differentiated impact on something that was passionate to him.”

Similarly, Lukas Walton’s cousins, Tom Walton and Steuart Walton, through their firm RZC Investments, have backed a new mountain biking park near the family’s hometown of Bentonville, Arkansas (also home to Walmart’s headquarters). Cousin Ben Walton and his 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 efforts through her family office, Innovaciones Alumbra. Also known as iAlumbra, the family office oversees an impact fund that supports ocean health, a charitable foundation and eco-friendly ranches. 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 similar to a multi-family office that happens to service members of one family than a traditional single-family office. Sharing a family office allows the Waltons to distribute the costs of services like tax accounting and property management while using their personal firms to service their individual needs.

It’s a model first pioneered by the Rockefellers. Since Standard Oil founder John D. Rockefeller established his family office in the 1880s, his descendants started their own firms for investing and philanthropy like Venrock and Rockefeller Brothers Fund.

That said, it comes with many challenges, especially as families move from the second generation to the third, 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 can be more distant and disparate in their interests. 

“To keep the family together from the third generation on, you have to invest 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 to add to all that, they marry people who sometimes can be even more difficult.”

A growing number of high-net-worth families are facing this challenge as wealth transfers from one generation to the next, according to Jaffe. A family’s third generation may feel pressured to keep the family office structure intact but may want to make different investment choices, such as seeding AI startups and divesting from oil, he said.

Jaffe, who has studied 100-year-old families, said most families find compromises between letting the next generation take the reins and squashing their individuality. For example, rather than starting a new family office for a third-generation heir, which is costly, they may opt to create an investment fund for them to run, he said.

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

“The next generation, when they have great amounts of wealth, are less concerned with how to make more wealth, and more concerned with the issue of, what do we do with it,” Jaffe said. “It’s not necessarily a political shift as it is a different level of looking at the world. You’re looking ahead. If you’re an elder, you’re looking at what you’ve done and celebrating yourself to a certain degree and feeling very satisfied, very confident.”