The public split of Bill and Melinda Gates spotlights a secretive fortune

FILE — Melinda French Gates in New York, April 24, 2019. The divorce of Melinda French Gates and Bill Gates puts a spotlight on a highly secretive fortune, which combines the value of Ford, Twitter and Marriott International, and is triple the endowment of Harvard. 

Gates built one of the great fortunes in human history when he founded Microsoft in 1975 with Paul Allen. The Gateses’ net worth is estimated to be more than $124 billion, and includes assets as varied as trophy real estate, public company stocks and rare artifacts.

There’s a big stake in the luxury Four Seasons hotel chain. There are hundreds of thousands of acres of farmland and ranch land, including Buffalo Bill’s historic Wyoming ranch. There are billions of dollars’ worth of shares in companies like AutoNation and Waste Management. There’s a beachfront mansion in Southern California. And one of Leonardo da Vinci’s notebooks.

“The amount of money and the diversity of assets that are involved in this divorce boggles the imagination,” said David Aronson, a lawyer who has represented wealthy clients in divorce cases. “There have rarely been cases that are even close to this in size.”

Only the 2019 divorce between the Amazon founder Jeff Bezos and his now ex-wife, the novelist and philanthropist MacKenzie Scott, was bigger. Bezos had an estimated fortune of $137 billion, though mostly in Amazon stock, and Scott kept 4% of Amazon’s shares, worth $36 billion at the time.

But Gates has for decades been diversifying his holdings; he owns just 1.3% of Microsoft. Instead, his stock portfolio includes stakes in dozens of publicly traded companies. He is the largest private owner of farmland in the country, according to The Land Report. In addition to the Four Seasons, he has stakes in other luxury hotels and a company that caters to private jet owners. His real estate portfolio includes one of the largest houses in the country and several equestrian facilities. He owns stakes in a clean energy investment fund and a nuclear energy startup.

There is also the Bill and Melinda Gates Foundation. Separate from the rest of the Gates fortune, with an endowment of $50 billion, the foundation is one of the world’s largest charitable organizations and plays a uniquely important role in global public health. The endowment is in a trust and cannot be divided as part of the marital estate, though questions remain about whether it will be the main recipient of their charitable contributions once the split is complete.

The couple has a separation agreement in place, according to the divorce filing by French Gates, but the details are not disclosed. The filing asks the court to divide their real estate, personal property and debts according to the terms set forth in that agreement. Lawyers for French Gates have been working on a plan for separating some of the assets since 2019, a person with knowledge of the matter said.

Divorce lawyers not working on the Gates split say some of the personal assets could be hard to value, hard to separate and highly complex. Some of the wealth has already been divided: Soon after the announcement, $2.4 billion worth of shares in AutoNation, Canadian National Railway and two Mexican companies belonging to the couple were transferred to French Gates — making her a billionaire in her own right.

An itemized list might be harder to come by.

“Divorces are actually one of the times that things crack open and the light shines in,” said Chuck Collins, senior scholar at the Institute for Policy Studies in Washington and author of “The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions.” But he added that prenuptial agreements and settlements were designed for privacy. “Parts of a prenup are about nondisclosure about all the family trusts and things,” he said. “They’ve got that all lined up before you fall in love.”

At the same time, lawyers point out that the issues that cause friction in the average divorce are completely absent for the stratospherically wealthy.

“It’s almost easier to settle a case like this, if the parties are inclined to do so, than it is to settle a case where people live comfortably, but don’t have enough to live comfortably once they split everything in half,” Aronson said. “For these people, it will only change to the extent of how many billions of dollars they can give away to whatever they want.”

At the center of both the Gates fortune and the Gates Foundation endowment is a little-known entity called Cascade Investment. Based in Kirkland, Washington, and run by Michael Larson, a former bond fund manager for Putnam Investments, Cascade has overseen both the endowment and most of the personal wealth of Gates and French Gates for decades.

Gates began reducing his stake in Microsoft beginning with the initial public offering in 1986, when he owned 45% of the company, a stake worth $350 million at the time. Today, he has an estimated net worth of $124 billion, according to Forbes, or $146 billion, according to the research firm Wealth-X. Including the Gates Foundation’s endowment and the Gates personal fortune, Cascade most likely oversees assets that put it on par or beyond some of the world’s biggest hedge funds in size.

Larson operates Cascade with an obsessive level of secrecy, going to great lengths to cloak the firm’s transactions so that they can’t easily be traced back to the Gateses. In a 1999 interview with Fortune magazine, Larson said he chose the name “Cascade” because it was a generic-sounding name in the Pacific Northwest.

Larson’s wealth-management strategy is grounded in value investing — a long-term approach to finding solid, underpriced stocks. This approach is often associated with Warren Buffett, who is a close friend of Gates. Larson focuses on buying and holding brick-and-mortar companies rather than high-growth technology stocks. (Gates chooses his tech investments and holds them outside Cascade.)

That strategy pays off for foundations and family wealth, both of which tend to focus on wealth preservation rather than making risky bets.

“He has delivered the best possible outcome for decades, with absolute discretion,” said Roger McNamee, a Silicon Valley investor who helped found the private-equity firm Elevation Partners and has worked with Larson in the past.

Larson has a particular fondness for luxury hotels, betting that top properties withstand recessions better than budget lodgings. Cascade owns various Four Seasons hotels, including one in Whistler, Canada, as well as the Charles Hotel in Cambridge, Massachusetts.

In 2007, Gates teamed up to buy the Four Seasons hotel management company with Prince Alwaleed bin Talal for $3.8 billion, with each taking a 47.5% stake. Although Cascade has said it is committed to Four Seasons for the long haul, in recent years both Cascade and Kingdom Holding, Prince Alwaleed’s family office, have flirted with the idea of exiting at least part of their investment, according to a person familiar with their thinking.

Late in 2019, Gates and Prince Alwaleed discussed the possibility of an initial public offering of stock at a valuation of $10 billion, the person said. The idea of an IPO or a private sale of one or both stakes has been broached again in recent months, the person added.

Kingdom officials did not respond to requests for comment. A Cascade spokesman declined to comment.

Gates and French Gates have played such an outsize role in philanthropy that questions about the future of the Gates Foundation immediately arose following news of the divorce. The foundation directs billions to 135 countries to help fight poverty and disease. As of 2019, it had given away nearly $55 billion. (In 2006, Buffett pledged $31 billion of his fortune to the Gates Foundation, greatly increasing its grantmaking.)

Since he stepped down from day-to-day operations at Microsoft in 2008, Gates has devoted much of his time to the foundation. He also runs Gates Ventures, a firm that invests in companies working on climate change and other issues. Over the decades, Gates shed the image of a ruthless tech executive battling the U.S. government on antitrust to be viewed as a global do-gooder. And he appears to be keenly aware of the stark contrast between the scale of his wealth and his role as a philanthropist. “I’ve been disproportionately rewarded for the work I’ve done — while many others who work just as hard struggle to get by,” he acknowledged in a year-end blog post from 2019.

The Bill and Melinda Gates Foundation was created in 2000. Today, the two serve as its co-chairs, which the foundation has said will not change after the divorce is complete.

But French Gates has recently been more public about the efforts of her other group, Pivotal Ventures, which is focused on gender equality and social progress. It remains unclear what level of resources will be at her disposal when the divorce is complete, but French Gates will most likely still wield enormous influence in the world of philanthropy.

“There’s no explanation how you get to be in this situation of privilege,” French Gates told The New York Times last year. “There’s just none.”