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game of thrones remigius kanagarajah is head of the royal house of jaffna. the problem is the monarchy was overthrown in 1621. what next for the world’s lost sovereigns? emma jacobs reports

www.ft.com/wealth sprING 2012

Ft WEALtH spring 2012 it is a thorny question:“ wh“at should former royals do next?

covEr pHotogrApH Kings and communities by jEroEn boumAn

Special reports editor Michael Skapinker Editor Hugo Greenhalgh Senior editors Jerry Andrews, Robert Orr Art director Sheila Jack Picture editor Krissy Hodgkinson Visual consultant Ed Robinson Production editor Jearelle Wolhuter Commercial director, EMEA Dominic Good Advertising Ceri Williams, Rachel Padhiar Publishing systems manager Andrea Frias-Andrade Advertising production Denise Macklin

contributors Daniel Ben-Ami is a freelance journalist Yuri Bender is editor-in-chief of Professional Wealth Management James Crabtree is the FT’s Mumbai correspondent Ian Driscoll is a freelance journalist Simeon Borisov of Saxe-Coburg-Gotha had the best solution. Having Matthew Garrahan is the FT’s Los Angeles briefly been King of Bulgaria – aged six – in the 1940s before fleeing correspondent the communists, the prince returned to power in 2001, but this time Emma Jacobs is the FT’s assistant business through the ballot box. Despite a fairly unremarkable four years as life editor Rohit Jaggi is the FT’s aircraft columnist prime minister of the country, he did at least solve that thorny question James Mackintosh is the FT’s investment editor of what former royals should do next. Jonathan Moules is the FT’s enterprise After the second world war, Europe was awash with dispossessed correspondent royals. The remnants of the Romanovs were parked in Paris, and Sarah Murray is a freelance journalist Vienna was seemingly stuffed with Hungarian and Polish princes. But Chris Newlands is managing editor of Ignites Europe as we move deeper into the 21st century, and further away from the age Feargus O’Sullivan is a freelance journalist of deference, a title can now be seen as an encumbrance, an embarrass- Matthew Vincent is the FT’s personal ment. “A title would put some people off and attract a lot of the wrong finance editor people,” Emma Jacobs reports David Gigauri, a Georgian prince, as Lucy Warwick-Ching is the FT’s online Money editor saying. “Many would see it as a joke.” Stephen Wilmot is property writer at So might Patri Friedman, grandson of Milton, and founder of the Investors Chronicle Seasteading Institute. Backed by PayPal co-founder Peter Thiel, its libertarian aim is to found self-sufficient communities free from pesky governments. Matthew Garrahan asks whether this represents a vision of the future – or simply a dream of the ultimate free market. As always, we welcome your views and opinions at the address below.

Hugo Greenhalgh, Editor [email protected]

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THE ROAD AHEAD Is the eastern boom MARK coming to an end? MOBIUS

he Chinese New Year slowed, it is still expected to nudge To the Chinese, the year of the dragon festivities at the start of 9 per cent. But an oversupply of $17,300 is associated with great deeds and big the year of the dragon property has seen investment in this – average spent projects. Yet this cuts little ice with proved even more spec- sector fall 40 per cent in December by wealthy on big some investment analysts. They point tacular than usual. But compared with the previous month. ticket purchases to reduced GDP growth figures and a fears of a hard landing November also saw unsold property severe market correction in 2011 that Tfor the world’s second- stock rise 26 per cent. SOURCE: sliced 18 per cent off the MSCI China biggest economy have left some The fundamental outlook on SCORPIO index. But the situation looks better experts reluctant to join the party. China remains positive but it seems FUTUREWEALTH now. People ask me if China is going to China has been the growth story of almost nowhere is immune from the REPORT 2012 have a soft or hard landing. My reply is the 21st century and early investors debt problems in Europe and the US. that China is going to continue flying. have reaped handsome rewards. But A problem for investors is that the Even if you consider the expected is the boom over? Hong Kong’s Hang rate of economic growth in China has contractions, it is still one of the fastest- Seng Index fell 20 per cent in 2011 not been reflected in returns. While growing economies in the world. From and the Shanghai Composite Index is there are opportunities, investors a stock-picking perspective, the market down a similar amount over the past must not get sucked into the hype and correction has also presented some year. While economic growth has invest too heavily in the region. compelling investment opportunities. We continue to see the drivers of the economy as consumerism and com- modities. With a population of 1.3bn, rising per capita income and a strong demand for consumer goods and ser- vices, the earnings growth outlook for stocks linked to this theme is positive. Over the past quarter, inflationary pressures eased and the industrial sec- tor recorded strong growth. Commod- ity stocks continued to look good, and we expect global demand for commod- ities to continue its long-term growth. When considering the impact of a possible global recession the situation looks positive. First, many emerging markets are still growing rapidly and 20% RISE IN we do not expect them to slow over the REQUESTS FOR next decade. Second, the situation in Europe can be worked out and likely PRIVATE TUTORS reforms there will bode well for the FOR CHILDREN global economy. W

SOURCE: COUTTS PRIVATE BANK The writer is executive chairman of the Templeton Emerging Markets Group

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Photos: corbis; charlie bibby

Treasure island: Singapore, already an opulent shopping destination, is hoping to attract banking custom from the east new silk route to singapore the island state is becoming the banking destination of choice for wealthy chinese

BY Yuri Bender

very year, hundreds of Chinese private bankers gather in against the traditional safe havens of the Us, Canada hongqiao, a nondescript corner of smog-shrouded shang- and australia, according to a study for the Bank of China hai, to learn the basics of wealth management. Chatting from the hurun research institute in Beijing. between sessions over beef noodle soup, after a frantic these self-made millionaires, following in the footsteps exchange of business cards, the talk can turn to favoured of Beijing-born action star Jet Li, who recently acquired destinations for the rapidly increasing number of wealthy singapore citizenship and bought a s$20m property Chinese. the current hot spot is undoubtedly singapore. in the city state, are taking advantage of a controversial But whether the tiny tropical state, once dismissed financial investor scheme. this allows wealthy migrants by its neighbours as a “Little red dot” on the map, can to effectively buy citizenship by investing at least s$10m, continue its rapid transformation into the “Zurich of the to be managed by a financial institution regulated by the east” depends on the answers to three questions. how monetary authority of singapore (mas). equickly can the country reorien- the singaporean banks that filter Chinese private tate itself to new markets? Can the banks cope with a clients through this citizenship programme are finding more international clientele? and will regulators be able they need to raise the service bar for this new breed of to preserve a clean reputation? wealthy customer. “We ask mr Chung if he needs tai- “singapore is preparing for huge growth from wanese dollars for his trip to taipei and we arrange for Chinese wealthy clients,” confirms shanghai-born somebody to meet him from the plane and fast-track him sherrie dai, head of China private banking for through immigration to a waiting limo,” says su shan standard Chartered. tan, group head of wealth management at dBs Bank the increasingly integrated territory of hong Kong is who has become a media celebrity in singapore. But now considered too close to the prying eyes of Chinese most important of all, she adds, “they must have dom authorities, while switzerland is too distant, both cultur- pérignon on tap in the airport lounge”. ally and geographically. “singapore shares the same such conspicuous consumption is already turning asian mentality and we will see huge immigration from parts of singapore into something of a high-end brand China for its high-quality schools,” says dai. theme park for wealthy visitors, says Jim prior, chief these assertions are backed by research from pwC, the executive of the partners, a branding consultancy. professional services firm, predicting singapore, whose “to the Chinese consumer, it’s not just about which financial institutions currently manage client assets of brands they buy, but where they buy them from,” he s$1.4tn (Us$1.1tn), will take over from switzerland as the says. “there is considerably more prestige attached to world’s leading wealth management centre in 2013. travelling to singapore to buy from the Louis Vuitton For the 14 per cent of Chinese millionaires looking to store at marina Bay than in buying the same item closer switch nationality and move assets abroad, singapore is to home. this is about more than just materialism, it’s

photo: dreamstime fast gaining ground as a desirable migration destination about demonstrating an appreciation of western style. ➤

ft.com/wealth|15 instructions. This is one reason why Lee Kuan Yew, Singapore’s senior statesman, who ruled as prime minister for three decades and oversaw separation from Malaysia in 1965, is calling for a renewed “bilingualism”. The Wealth Management institute (WMi) – set up by Temasek holdings, the state-owned investment company, which holds large stakes in listed companies – is also grappling with the shortage of language skills and plans eventually to import lecturers from China. Cynthia Teong, the WMi’s chief executive, is more confident in her mission to raise standards of competency in private banking and to “Singapore may not quite make sure bankers turn away illegitimate be pariS, but it iS a good funds. This has been done through the implementation of a code of conduct, laid deal culturally cloSer [to down by the MaS and enforced through the weSt] than Shanghai” compulsory examinations. The authorities have been particularly keen to wipe out the rampant misselling of structured products, which many Singapore may not quite clients complained about in the lead up to the 2008 be Paris, but it’s a good crisis. however, the period in early 1995 when deal culturally closer Barings Bank collapsed following the fraudulent trading than Shanghai.” activities of Singapore-based Nick Leeson is remem- The spending habits bered as one of the bleakest in the nation’s short of the newcomers con- history. “after Barings, we have been scandal free,” trast with those of the says David Lim, chief executive of the Singapore established, domestic cli- subsidiary of Julius Baer, the Swiss private bank. City state: some casinos entele of DBS and other “There has been a ‘never again’ feeling since then, are only open to non-Singa- banks. “Singapore has and we have significantly changed the way banks poreans (top); wealthy permitted the develop- operate.” Chinese, such as Jet Li ment of one of the (above), are investing in largest casino centres ankers working for international groups Singapore property (right); in the world, that is are keenly aware of potential politi- Nick Leeson brought down only open for non- cal headwinds that could cut short Barings Bank in 1995 (below) Singaporeans, which Singapore’s success story. They have gives you a clear sign of watched the uS and European nations who they are trying to pursue Switzerland and force Europe’s attract,” says Sebastian Dovey, manag- private banks into large concessions. ing partner of Scorpio Partnership, the The importance of the finance sector wealth consultancy. “This is a China- to Singapore’s economy means it is focused initiative to rival Macau.” “vital for us to ensure that in 2020, Many of the low-paid workers who when we are looking back, the legacy staff these new resorts are imported frombis a strong one”, Lim adds. mainland China and native Singapo- This must be achieved not only through effective reans complain about the new arrivals’ regulation, but also by providing clients with a high- poor knowledge of English. But the main quality, profitable investment strategy, says Lim. “This is gripe of wealthier visitors is that Singa- a crucial phase in the development of poreans’ Mandarin is not up to scratch. Singapore. We have a critical mass of banks. The next “They can’t understand what we are question is, what can we provide for our clients? This saying as our accent, intonation and must not just be a great view of Marina Bay. The pronunciation are not as precise as those experience of the portfolio must be as good as the view.” in Shanghai and Beijing,” says a senior Tax transparency will herald the start of Singapore’s government officer of Chinese descent, latest chapter, with the MaS keen to learn from Swiss whose employees communicate in “Senglish”, a mix of mistakes and make tax evasion a criminal offence. Malay, Mandarin and English. “Chinese will forgive west- along with such regulatory changes, the government erners for not speaking Mandarin, but can be very judg- has backed a reorientation of the country. “Singapore mental with people who look like they should speak it.” banks used to be facing south; now we are facing Banks also have work to do to correct this lack of top- globally,” says rajesh Malkani, regional head of level language skills among their fast-increasing armies private banking for asia at Standard Chartered. of relationship managers. Chinese clients confused by “There are different views on when we are going to “put” and “call” options have been known to lose money overtake Switzerland, but clearly, we are taking some because staff cannot understand their Mandarin very significant strides.” W PhoToS: CorBiS; rEuTErS; afP

16 |ft.com/wealth

Co bl Co ga Ch ar ig e inin ar rp mm th hte it or un g eC ie at d s grou it ou ar be e y. so e ne ntr ho nd bene Ci vo sp y’ al wi s it le fi als, re ty th nce ti Co sp ng nin in sC ons ons – ho di bu ibil a’ ol t s so it bu s y and si too is ne ss

PHOTO: PanOs BY james craBtree

o say that Tata Group has a reputation for corporate social responsibility would, in India at least, be to com- mit a notable understatement. Drive around any big city and you will spot schools, hospitals, medical research centres and civic institutions funded by Tata. The more than 100 com- panies that make up the country’s most recognisable conglomerate are part owned by a charitable trust that doled out more than $100m in 2010-11 alone to charities and non-governmental organisations. Ratan Tata, the group’s chairman who is retiring at the end of the year, has a reputation for philanthropic generosity so powerful it borders on the religious. This seemingly unimpeachable corporate probity goes some way towards explaining the shock last year when the company was dragged into one of India’s raciest corruption scandals, which riveted the public. TThe group’s was just a walk-on part, and one that turned on whether it had been pressured into using its charitable arm to invest in medical equipment for a hospital that happened to be in the constituency of a powerful politician — who in turn found himself at the heart of another explosive corruption scandal, and, ultimately, in jail. Tata strenuously denied wrongdoing, but the incident raised wider questions about the extent to which the good works of India’s largest companies were purely charita- ble. More importantly, as the concept of corporate social responsibility takes off in the world’s largest democracy, it illustrated the tricky balancing act required to establish corporate good behaviour against India’s unusual back- drop of rocketing growth and deeply imperfect politics. To ask a business leader in Mumbai or Delhi about the rise of Indian CSR is to elicit an exasperated response. The CSR in action: concept is gaining increasing prominence in the glossy girls practise at an brochures and polished websites of a new generation of archery academy, companies, but few things irritate Indian executives more where education and than the idea that cajoling business to think about its training is provided social effects is a western concept, and one that must be by Tata, the Indian imported to fix their country’s broken corporate culture. industrial With justification, they point out that large Indian conglomerate businesses, most obviously the older dynastic conglomer- ates such as Tata, Mahindra & Mahindra and the Aditya Birla Group, have been pioneers in the field. Birla, for instance, claims to spend around $60m each year on charitable works, running dozens of schools and hospi- tals, and supporting development work in roughly 3,000 villages. Similar projects are common in a country whose self-evident social needs have long demanded that busi- nesses chip in to support social welfare. ➤

ft.com/wealth|19 customers, suppliers and employees.” few things irritate indian Admittedly much of this starts from a low base. executives more than the idea KPMG, the consultancy, recently admonished India Inc for its unstructured approach, noting that barely two in that [csr] is a western concept 10 large companies had systematic CSR programmes, compared with roughly three-quarters in the west. This may change soon, given planned legislation to Neither historic nor contemporary CSR efforts in India make annual CSR reporting mandatory for large busi- are entirely charitable, of course. Much of it stems from nesses. Last year, further plans were floated to force all the need to house, heal or educate workers in industrial large businesses to spend 2 per cent of their net profit facilities. As in the developed world, the concept also on charitable endeavours — but the proposal was quietly tends to be oddly popular among enterprises that have dropped in the face of fierce protests from industry, as recently been criticised for environmental or social well as campaigners worried about corruption. problems. Fast-growing energy and infrastructure outfits such as Vedanta, Essar and Adani are now some of the ven without compulsion, India’s increasingly healthy biggest converts. CSR industry seemed in full swing on a sunny Saturday India’s ferocious media culture, rising environmental in early February, when I entered the lobby of one of consciousness and powerful anti-corruption campaigns Mumbai’s plushest five-star hotels to pay a visit to a large have also played a role, creating a background against conference marking “world CSR day”. which corporate social irresponsibility is much less Walking past a Louis Vuitton shop in acceptable. Ever more international businesses are also the lobby, I headed down to the basement, ending up in a moving in and bringing their CSR programmes with sponsorship area trumpeting the beneficence of many of them. Meanwhile, India’s celebrities are getting in on the largest companies operating in India – from DHL and the act too, with Bollywood actors and Sachin Tendulkar,eBharti to Coca-Cola and ArcelorMittal. the cricket player, setting up foundations. A prominent board outside the main “There is something of a CSR boom going on in ballroom “saluted the contributions” of the nation’s most India,” says Emily Harrison, executive director and charitable tycoons, with smiling pictures of Sunil Mittal, founder of Innovaid Advisory Services, a Mumbai-based Kumar Birla and (inevitably) Ratan Tata. company that advises businesses on CSR. “The way it is If jargon is any indication, India’s CSR cadres seem happening is changing too,” she says, “with a easily on par with their industrialised world counter- move [away] from a world of corporate parts. Serious-faced executives produced numbing talk philanthropy and writing cheques to of “triple bottom lines” and “social metrics”. The day NGOs, to one where businesses try to ended with a self-described “glittering awards ceremony”, understand and manage systematical- one of many that now dot the corporate calendar in ly how they affect their environment, Mumbai and Delhi. ➤

Philanthropist and businessman: Ratan Tata (green tie), chair- man of the Tata Group, at the reopening of the

Taj Mahal Palace and PHOTO: AFP Tower hotel in Mumbai

“There is a real risk in india ThaT Bhanu Meta, president of the Centre for Policy Research, a respected think-tank based in New Delhi. But Meta CorporaTe soCial responsibiliTy says the risks could equally flow the other way, with companies using charitable arms to buy off opposition in jusT CreaTes a new kind of local communities, for instance. Such concern seems especially warranted in a country paTronage neTwork” filled with dynastic, family-owned businesses, whose many charitable foundations are typically run by rela- tives or friends of the owners, with minimum account- ability. Indeed, worries about just this sort of problem were part of the reason moves towards a compulsory CSR system were shelved last year. There is another danger – that the money will be spent badly. This is partly due to the belief of India’s increasingly assertive new business elite that it can bring special techniques to solving the problems of poverty or education. Speaking at a panel on world CSR day in Mumbai, Bhaskar Chatterjee, director-general of the Indian Institute of Corporate Affairs, remarked on one common problem, where “a company turns up and says ‘let’s build a school’ or ‘let’s build a road’” — but without asking local populations what their communities need. Inefficiency is also an issue, notably in India’s 250 or so state-owned enterprises. Many of these are gigantic

et for all the pictures of smiling children and back-slapping chief executives, the reality of CSR in India can be rather more opaque, as Tata’s problems in 2011 showed. The scandal was brought about by Nira Radia, a prominent lobby- ist who worked for both Tata and billionaire Mukesh Ambani’s Reliance group. She had her phone tapped by the tax department for the best part of a year. The resulting “Radia tapes” were leaked to two current affairs magazines in 2010, and the transcripts pub- ylished online. The files exposed a murky world in which powerful behind-the-scenes go-betweens pushed deals and fixed problems in the nebulous intersection between business, journalism and public policy in India. In one of the transcripts, Radia talks to an aide to Andimuthu Raja, the telecoms minister at the time, who is now in jail awaiting trial for his part in India’s multibillion 2G mobile scandal. The two discussed whether Tata’s trust might provide medical equipment to a hospital in the minister’s home town. When the tapes aired, Tata produced a speedy public outfits such as Coal India; most are also exceedingly badly denial. Ratan Tata had been approached about a $4m managed. Nonetheless, many are used by the government grant to the hospital, it said, but the trust had ultimately to distribute funds to local communities. spent only around $600,000 on a scanner. “The attempt “The public sector companies spend lots of money, that was made by certain quarters to establish that this largely because they are forced to,” says Gurcharan Das, support was a quid pro quo has since been disproved,” a a former chief executive of Procter & Gamble India, spokesman told the Financial Times. the consumer goods group, turned writer and manage- Tata’s statement also stressed “a condition of such ment theorist. “But just as with their own businesses, grant support is that the recipient grantee provides free they manage this charitable money very badly. They are medical services to the poor and disadvantaged sections all over the place.”Das sees a glimpse of a more positive Giving back: Tata of the community”. But the impression lingered that, in future in India’s upper strata of competently managed, sponsors many a country widely recognised for its political infelicities, less-regulated companies, such as Infosys and Wipro, the charitable projects such corporate generosity was being used as a type of technology outsourcers. Both are revered and they and (top); Bollywood star bargaining chip by businesses to respond to pressure their peers also tend to take CSR seriously. Copy their Shahrukh Khan at from grasping politicians keen to fund pet causes. example and remove the malign hands of the state, Das a hospital he funded, “There is a real risk in India that CSR just creates a thinks, and you might just unleash a virtuous cycle of which will provide new kind of patronage network, where one politician corporate performance and generosity. But if not, India’s free treatment to runs an educational trust, or another politician wants CSR boom is unlikely to win the country the corporate children (right) something done in their constituency,” says Pratap reputation it hopes for. W PHOTO: ReuTeRS

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lost kingdoms PRINCE KANAgARAjAh Is oNE of A smAll BAND of RoYAls Who hoPE to oNE DAY ClAIm thEIRBIRthRIght

BY emma jacoBs portrait BY jeroen Bouman

kingdom of Jaffna was destroyed by the Portuguese in 1621 and today the country is a republic. His Royal High- ness Prince Remigius Kanagarajah in fact lives in the Netherlands, his home for 21 years, and works for a mul- tinational company. And while he is the most prominent, he is not the only pretender to the throne. The quietly spoken and excessively polite Prince Kanagarajah acknowledges there is no established monarchist movement in Sri Lanka but says “a lot of people would like me to return – they know I want to bring peace, and a constitutional monarchy can rein- state stability”. How does he know this? “Through email correspondence and Facebook, I know I have people’s respect.” He is also in touch with other exiled royals: “We exchange messages and greetings with other royal houses. It’s good to get their ideas and contacts. Just because you leave your country does not mean you want to forget your people.” Guy Stair Sainty, an author on royal genealogy, believes claimants to Asian dynasties should be treated with scepticism. “These successions were not necessar- ily governed by any form of primogeniture. Later, when the British imposed some rule of law on the princely N states, they were encouraged to adopt it – male only – ine years to prevent the internecine squabbles that happened so ago, 47-year-old Remigius Kanagarajah took over as frequently. But it is impossible to look backwards.” the head of the royal house of Jaffna. It was a position Moreover, he says, it is very hard to prove 17th- his older brother declined because he preferred a quiet century descent to a standard that would hold up in life. “He wanted privacy and the role means you have to court – there were no baptismal or parish records, of take part in a great deal of public events and charitable course. “For deposed Asian dynasties, once two or three functions, says Prince Kanagarajah, who respects his generations have passed, one can merely look at a group brother’s decision, but believes the royal legacy is too of descendants and conclude that any one of them might important to throw away. “I don’t think you can abandon have been the heir if the dynasty had continued.” your royal life. You have to sacrifice everything; you can’t Prince Kanagarajah is unfazed. He has heard it all do whatever you want.” before. When people question his legitimacy, “that’s due He was married once to someone who did not under- to ignorance – they haven’t learned their history lessons”, stand his royal commitments. “She resented my duties, he says with forceful courtesy. so it broke down.” This experience has convinced him to Kate Williams, a historian and author of Becom- marry someone within the family next time. “My search ing Queen, the story of Queen Victoria, has little truck to find the right partner does make me sad. Sometimes it with such pretenders: “Since the whole point of a is lonely. I did meet someone but couldn’t take it further.” monarchy is to be the head of state, they are pretty It is a poignant story, made all the more so by the fact redundant when they are not. [They are] mere symbols that Prince Kanagarajah is not in power. He does not to be beloved by the old faithful… memories of an earlier even live in Sri Lanka, the home of the royal house. The age.” Nonetheless, she concedes they can be “pretty ➤

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dangerous – they might always come back. George VI [of Great Britain] was always terrified of his brother coming back to seize the throne. Thus Lenin had the tsar executed, and the French Revolu- tionaries tried Marie Antoinette. Governments fear monarchs when they are deposed.” Kanagarajah is not the only claimant to the throne hankering after a comeback. Amid the turmoil of the Arab spring, Prince Moham- med El Senussi of Libya (who lives in north London and whose great uncle, King Idris, was deposed in 1969), toured the Middle East, meeting Libyan groups. He told the European parliament in April that if he was asked, he would return to his country. In 2001, Simeon Saxe-Coburg- Gotha became one of the world’s first dethroned monarchs to win back power at the ballot box. Fifty- five years after he was forced into exile by the communists when only nine years old, he was asked by Bulgaria’s president to form a government. Others have adapted to the life of a commoner. The Sultan of Zanzibar, who ruled for less than a year, left in 1964, leading a modest existence with his wife and six children – he is now a pensioner living in Portsmouth, southern England. David Gigauri, a banker residing in London, has a mixed view of the importance of his heritage. His mother is a descendant of Georgian princes. One of his great-grandfathers, Prince Nestor Gardapkhadze, led one of the uprising against the communists. He enjoys learning about his background (“it’s good to know who your predecessors are”), and attends balls for descend- ants of European royalty. “They make you feel part of a club. It’s nice to see people who have shared back- Royal aspirations: grounds.” However, he only takes it so far. “It does not (clockwise from dictate my way of life. Some people seem to be a bit top) a number of stuck. They live in a bubble and don’t move on. They Romanov pretend- choose not to deal with people outside their circles – it’s ers claimed to have really limiting. They follow an outdated way of life.” escaped the execution For such royals the lifestyle is one of cocktail circuits of the last tsar and and providing fuel for gossip-mongers and readers of his family; Archduke glossy magazines. Philipp and Arch- The London season, which holds events for debu- duchess Mayasuni of tantes “to perpetuate English traditions and to continue Austria; Prince the highest level of social networking”, has had non- Mohammed El ruling European royals as patrons, including Princess ➤ Senussi, heir to the Libyan throne; the Sultan of Zanzibar, “[former monarchs] can be with his heir pre- sumptive in 1936; pretty dangerous – they might Prince Aleksandar II come back.governments fear and Princess Kata- rina of Yugoslavia them when they are deposed” PHOTOS: EyEVINE; SCOPE FEATuRES; CORBIS

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Gigauri would never put a Georgian title on his busi- Some fake royalS include women ness card. “It sends the wrong impression. Society is “who have Said they muSt be prejudiced – a title would put some people off and attract a lot of the wrong people. Many would see it as a joke.” princeSSeS becauSe their fatherS While many lay legitimate claim to royal heritage, alwayS called them ‘princeSS’” some are outright fantasists. As Stair Sainty points out, “many people are unhappy with their real origins. It’s not uncommon for people to Olga Romanov, a descendant of the Tsar of Russia, and, fantasise their parents are not their real ones, particu- in previous years, Princess Katarina of Yugoslavia and larly after a family row.” Archduke Philipp of Austria. Jennie Hallam-Peel, the These people are driven, he says, partly “by a desire to organiser, feels that “overseas royals are so very proud be royal [and] partly to make money. [They also] enjoy of their heritage, and have a more formal outlook and being the centre of a [small] society”. old-fashioned standards that are very The reality, of course, is that the births, marriages and refreshing in our modern, frequently deaths of every member of every European royal family discourteous world”. has been fully documented over the past 500 years, so the fantasists have to try and claim they are a missing he Queen Charlotte ball, a highlight royal, perhaps one who was considered to have been of the London debutante season, is murdered or executed. Several people have declared not the only gathering of non-reigning themselves to be the long lost Tsarevich (who they claim royals. Cilane, established in 1959 was not murdered) or one of his sisters, the best known and comprising 15 independent national associations of of which was Anna Anderson, a Polish factory worker nobility in Europe, each considered representative of their with a history of mental illness who insisted she was the country’s aristocracy, “seeks to maintain an understanding Grand Duchess Anastasia. She fooled many, including of the identity of the nobility based on historical and legal some relations of the imperial family. accuracy while promoting the maintenance of traditional “There are people who have invented non-existent noble values”, according to a spokesman. It too organises dynasties that supposedly ruled over countries of which charitable events and balls. no one has ever heard,” adds Stair Sainty. “Amazingly, Several members of former ruling royal families they too find followers, presumably people with other- attended the wedding between Kate Middleton and wise empty lives who, when their beliefs are challenged, Prince William in London’s Westminster Abbey last year, immediately denounce the challenger as part of the con- Tincluding the ex-kings of Romania and Greece. spiracy to do down their prince or king. These are people King Michael of Romania, one of the last surviving heads who can no doubt be ready to believe the earth is flat or of state from World War II, was accompanied his daugh- peopled by aliens.” ter, Princess Margareta. Count Tibor and Countess Anna Some of these fake royals even include, according to Kalnoky, also from Romania, were also invited. They are Stair Sainty, women “who have rather preposterously close friends of William’s father, Prince Charles, the heir said they must be princesses because their fathers always to the British throne. called them ‘Princess’ ”. W

King of the ballot box: in 2001, Simeon Saxe-Coburg-Gotha (centre) became one of the world’s first dethroned monarchs to be elected back into power, as prime

minister of Bulgaria PHOTO: GETTY

Seasteading the found to him Pa Th liber tri e,tesea: the sea, e ta Fr invesled views rian iedman In st ’s itute

PHOTO: DusTin akslanD seachange a group of libertarian entrepreneurs dream of autonomous floating cities

BY matthew garrahan

magine a network of self-sufficient communities floating in oceans beyond the reach of international govern- ments, capable of setting their own laws, norms and social rules. Led by pioneering individuals, these socie- ties could become a blueprint for a new way of life – one that is more equitable, tolerant and entrepreneurial. It sounds far-fetched but so-called “seasteading” communities could become a reality if a California-based group has its way. The Seasteading Institute, a collection of ideologically driven libertarians and entrepreneurs, wants to “further the establishment and growth of permanent, autonomous ocean communities”, according to its website. With backing from Peter Thiel, the billionaire who co-founded PayPal, the online payments business, and who was an early investor in Facebook, the social network- ing website, the group has succeeded in turning a concept Ithat sounds like the premise of a post-apocalyptic science fiction movie – Kevin Costner’s Waterworld springs to mind – into something more tangible. It has pushed seasteading into the mainstream at a time when confidence in government – in the US, in particular – is low, thanks to a prolonged economic slump and a decade of costly and bloody wars in Afghanistan and Iraq. The Seasteading Institute was founded by Patri Fried- man, the grandson of Milton Friedman, the economist. “I was getting frustrated with the way our society in the US was structured,” he says in an interview with the Finan- cial Times. Building on some of his grandfather’s views about the limitations of government, Friedman has taken libertarian thinking into an altogether different realm. His market-based approach is quite simple: if you are unhappy with your government, then you should be free to use another one – or, better still, start one yourself. Seasteading is a chance to try different governmental structures in an autonomous environment, he says. “If people are able to test different products, some of them will work better than others. This is about the evolution of governments, not about having one great idea for a better government.” ➤

ft.com/wealth|31 “We see ourselves Friedman recently stepped down as chief executive of the institute, although he remains chairman. Having building a platform blogged about his decision to separate from his wife and tweeted about his sexual experimentation, he is an for other people unconventional character who continues to be a passion- ate advocate for seasteading. to experiment on” “I agree with a lot of what my grandfather says about freedom leading to economic growth,” he says. “But when it comes to the question of why we don’t have rules that work for us, I think it is because we have a dysfunctional government system and no start-up governments.” Michael Keenan, president of the institute, tells me that national governments are inherently flawed and difficult to fix. “The main problem is the lack of competi- tion for better services,” he says. “We impose the same system on hundreds of millions of people… but people are dissatisfied with how things are going.” The institute does not intend to construct its own float- ing vessels – at least, not yet. “We see ourselves building a platform for other people to experiment on,” he says. “There should be a marketplace for government… people are largely forced to accept what 51 per cent of your fellow citizens want, or think they want. That’s not fair.”

he institute started its work in 2008 with a grant from Thiel, who has donated about $1.3m to the organisation. The first project to come out of the institute was the brain- child of Max Marty, its former director of business strategy, and Dario Mutabdzija, another former employee. They created Blueseed, a start-up venture that aims to solve a thorny problem affecting many Silicon Valley companies: how to attract engineers and entrepreneurs who have not been granted work permits or visas. “Our team is creating a high-tech, visa-free entrepre- neurship and technology incubator on an ocean vessel in international waters,” declares the group’s web site. Marty Ttells me that Blueseed is exploring retrofitting a cruise ship or barge, which would be moored 12 miles off the coast of San Francisco. It would be spacious and comfort- able enough for people to live on for long periods, and close enough to Silicon Valley for them to travel there when required. Blueseed is in the “seed funding” stage, he adds, and has raised $50,000, although the target is $500,000. If it reaches that amount, the company hopes to raise $15m in the next round. Much needs to be done: the group has to investigate the kind of vessel to use and explore supply-chain issues, such as how to get food on board and how the ship will be powered. “Right now, our favoured solution is an accommodation barge – a ship that has to be towed into place,” says Marty. The group would charter or lease the vessel and generate revenue by charging rent. “It’s also possible that we would purchase a cruise ship… it depends on market circumstances.” The company is convinced that the proximity to the world’s technology capital will increase the project’s appeal. “We want to make it the Googleplex of the sea,” All aboard: Peter Thiel says Marty, referring to the headquarters of the technol- (left) has donated $1.3m ogy company]. “This project will solve a very specific to the Seasteading problem.” He insists that it is an achievable goal, unlike Institute; a design for other ideas for seasteading communities, which may take a potential seasteading decades to implement. “We’re not creating a new cur- project (above, right) rency; we’re not talking about issuing new passports… pHOTO: cORBIS this is for people who need to be close to Silicon Valley.” I ask if Blueseed has had trou- ble convincing investors to take them seriously. “People are gen- erally very receptive,” says Marty. “They say ‘wow’. We pitched at a venture capital event and an investor told us: ‘This is so crazy, it might just work.’” Not everyone believes in the vision, though. “Some people will label us crazy. But this can all be possible using today’s technology.” The movement would have had trouble getting off the ground without the support of Thiel. The billionaire is the institute’s key financial backer, who invested in the project after being pitched by Friedman. With an eye for the potential of technology to change the world, he has not let practical concerns impede his enthusiasm for seasteading. “When you start a company, true freedom is at the beginning of things,” he told Details, a US magazine, recently. “The United States constitution Longer term, he sees had things you could do at the chartering a jungle city a fixed platform in interna- beginning that you couldn’t do In his quest to create an environment for new, tional waters as among the later. So the question is, can experimental forms of government, Patri Fried- best seasteading options. you go back to the beginning of man has looked to the sea. The cost of construction things? How do you start over?” But he has also looked on land, and is in would be significant. Thiel – who stands to make negotiations with the government of Honduras “A platform is the most billions from the upcoming about a radical project that could lead to the expensive [option], but Facebook initial public offer- creation of a new “charter city”. benefits from economies of ing – has the money to ponder Future Cities Development is a start-up com- scale,” he explains. Expen- such questions; others looking pany that, in December, completed a seed round sive, certainly, but are these for investments that give them of funding. It aims to “advance humanity by grand plans also unrealis- a return on their money may be building cities based on innovative forms of tic? “Seasteading needs to more sceptical about putting their governance”. Under the proposal being dis- be sustainable to succeed,” wealth into floating communities cussed, FCD would pay a lease fee to the state and argues Keenan. “We’re very founded on libertarian idealism. then invite national and international businesses focused on entrepreneurs While Thiel has a firm libertarian to come to the city. Criminal law would apply, but and building sustainable streak, Keenan tells me that the the company that wins the right to operate it will businesses, and there people working at the Seasteading be able to set its own fiscal and tax rules. are plenty of people Institute “come in from differ- Friedman is not lacking in ambition, yet he interested in investing.” ent angles… a lot of people are faces competition in Honduras: a rival start-up If a seasteading project interested in creating diverse, – Grupo Ciudades Libres (Free Cities Group) – launches successfully autonomous societies. Some think has also signed a memorandum of understand- “then countries will rush government is a trillion-dollar ing with the government. It is unclear which, if out and experiment with industry and a lot of money can any, of the schemes will proceed. these things. The world be made here, potentially. I don’t “We have a lot of work to do,” says Friedman. needs... new answers and want to impose libertarianism on “But we’ll get there.” seasteading is one of the everyone. I want people to have best shots we have. We need the government that they want.” a reboot, an alternative system.” Again, no one at the institute believes big change will The biggest challenge is not cost, according to happen overnight. Blueseed has the best chance and is Friedman. A “ship stead” would probably run to tens of the most advanced seasteading venture, partly because millions of dollars, he says, while a platform would cost the projected cost of living on the vessel is fairly low, “hundreds of millions” and a permanent village would Keenan says. “The cost per square foot is the same as run to “billions… [but] if you look at some of the big real innercity apartment living in San Francisco or New estate projects, this is quite reasonable,” he says. “The York.” However, he admits costs “vary wildly” depending challenge is getting people to see that this can be a route on the floating structure used. to political reform.” W

ft.com/wealth|33

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philanthropy hoWto BE GooD

Make it meaningful

40 |ft.com/WEalth

they attach so many st“rings to the mone“ y that creativity is stifled

egardless of a donor’s BY Ian DrIscoll them in a direction that they don’t hoops that don’t necessarily need to underlying compulsion, want to go”. Having an open dialogue be there,” she says. “Often it’s a most people assume that allows recipients to be honest about a donor’s foundation’s employees who do philanthropy is good. gift, whether it is helpful to an organi- this more than the donor herself. It is But what makes a good sation or whether the philanthropist is important to know how you are being philanthropist? Given the undermining their actual goals. represented as a philanthropist.” Rdifferent perspectives of Another danger is that donors make Of course, most philanthropists are grantors and grantees, it is a subjective offers of help or expertise that are not looking for results. Having identified a question, and perhaps an irresolvable really wanted, but which, because of field of interest and then narrowed it one. Yet with a growing number of the power imbalance, the non-profit is down to a particular non-profit, this is academic sources, training pro- in no position to refuse. Instead, good exactly what they should do. However, grammes and advisory services for philanthropists are aware of when their Stannard-Stockton warns that while philanthropists to draw on, it is a skills might be helpful as well as when some donors like to keep overheads to a question many seek to answer. they will not. minimum, “it’s not always the best path Jacqueline Elias, managing director “Donors often have a lot more to to the best results. Sometimes investing and co-head of the JPMorgan Philan- offer than just money. They have their in overheads such as technology, people thropy Centre, says that the first step expertise, time and connections, and and infrastructure, is important, too.” in cultivating a good philanthropist bringing those to bear can be a very Interestingly, much of this jibes with is ensuring that a donor’s mission has powerful thing. But the expertise the opinions of those on the ground, personal meaning. “You need to get involved in creating wealth is not the the charity workers whose job it is to satisfaction out of what you are doing, same as that involved in running social convert a donor’s largesse into results. whether it’s counting the number of programmes or allowing a non-profit A non-profit executive with field meals you are paying for or the policy to deliver social services to people experience in Africa, and who works issues you are affecting. To remain who live on the street,” says Stannard- now for a Geneva-based medical motivated, what you donate to has to Stockton. “Donor expertise is usually charity, believes that a “good” philan- match your view of the world because found around organisational expertise, thropist is someone who takes the time philanthropy is something you don’t and many people in non-profits have to evaluate a non-profit’s mission, goals need to do.” programme expertise but not necessar- and manner of functioning, and only Elias believes that by asking ily organisational expertise.” provides funding once they are themselves a few pertinent questions, In addition to being naturally convinced that the organisation is donors can clarify their aims, and how inquisitive, flexibility is another impor- viable. “However, once they give money, to achieve them: why do you want to tant trait, suggests Stannard-Stockton, they should give the organisation the do it? How public do you want to be, as again using the example of homeless- flexibility and latitude to use the money

this will affect how things are struc- ness to illustrate his point. Less home- as it sees fit to advance the organisa- tured? Will you do it full time or on lessness is a good thing, he says, but tion’s goals. We often find that people

the side? How much do you want to do are attracted to organisations like ours now rather than posthumously? because we are creative and nimble, but She is happy to counsel certain to stay motivated, What they then attach so many strings to the potential donors not to get involved in yo“u give to has to ma“ tch money they do give that this creativity causes until they are ready. “Knowing is stifled,” she says. how much intellectual energy you want your vieW of the World What concerns this particular to put into philanthropy is important. executive is the focus on quantitative Sometimes people realise that focusing results that increasingly drives donor on their business is still paramount.” behaviour. “People get excited about Once a donor has settled on a cause, there are many different approaches certain interventions because they are experts say they should be aware of the to solving it, and it is difficult to know measurable; 500 bed nets distributed potential power imbalance between the what works. Being flexible enough to in Malawi equals 500 people covered donor and the recipient. know when certain approaches are which saves X number of lives from “These organisations are starved of not working, and being open-minded malaria.” The trouble, she argues, is that capital. They tend to run lean, with no enough to changing them, is essential. the same donors are reluctant to pay to reserves, and it means that they are not JPMorgan’s Elias believes that build a storage facility for the nets or for in a position to turn down money,” says frequently it is poor practice rather support staff like accountants. “People

TrATIOn: GETTY Sean Stannard-Stockton, a California- than bad philanthropy that can under- with money are often highly educated, uS based wealth adviser who works with mine donors. “People get lost in the but their money goes to the ‘hard’ stuff.

ILLL philanthropists. “And that can send results or put non-profits through You need the ‘soft’ stuff, too.” W

ft.com/wealth|41 philanthropy non-profit boards

Partners in virtue

s philanthropists BY sarah murraY working in a particular issue area. executive committees are spending become more engaged illustration BY However, it also involves a degree of at least a day a month,” says Mark in the causes they sup- nick lowndes introspection. “What you’re trying to Kramer, founder and managing direc- port, many are looking do is to identify some possibilities but tor of FSG, a non-profit consulting for greater hands-on at the same time to be ruthlessly honest firm. “And some retired individuals involvement – whether about why you want be on this board,” may spend 20 hours a week or more Avolunteering at a home- says Crompton. working with a non-profit.” less shelter or offering pro bono legal “A lot of times, good intentions get Of course, financial considerations services. Those seeking a more strategic ahead of practicality,” she explains. are critical. While board service is a role in shaping the way a non-profit “People imagine in the heat of the form of volunteering, membership – organisation evolves might consider moment that they will be able to have particularly in the US – is usually taking a seat on the board. Yet finding an impact by joining a board, but they accompanied by a requirement to the right organisation – and the right are not necessarily realistic about how donate or raise a certain amount of board – takes considerable research. much time they can dedicate to it.” money for the organisation. “The first thing you want to do is Certainly, the time commitment Experts also point out that those your own due diligence,” says Linda that comes with board membership considering non-profit board member- Crompton, president and chief can be substantial. In addition to the ship should spend some time assessing executive of BoardSource, a US-based four to six meetings a year, members their qualifications and experience. organisation that promotes quality need to familiarise themselves with the “You need to think about your own and effectiveness in non-profit boards. organisation, keep up to speed with its skills and how you can be useful,” says “If you get it right, it can be one of the operations and be prepared to attend Alice Korngold, chief executive most rewarding things you do.” or help organise galas and other fund- of Korngold Consulting, a US- Research could include everything raising events. based advisory company. from choosing a cause to support, to “The most active When it comes to larger

identifying the leading organisations board chairs on or global non-profits, moreover, organisations

generally expect poten- tial board members If you get It rIght, It to have prior board “ experience. ca“n be one of the most Even so, says Kramer, board rewardIng thIngs you do members who have acquired this experi- ence in the private sector should remem- ber to bring the same rigour to non-profit board participation that they would in a corporate context. “Often smart, successful business leaders seem to take their business hat off when they walk into a non-profit board meeting,” he says. “They do not bring the same expectations

42 |ft.com/wealth of performance and financial and best ones are those that are very open issues board members are able to weigh strategic discipline that they would with the board about the problems they in on and the extent to which they for companies.” are encountering,” says Kramer. are able to participate in shaping the Yet not all non-profit boards are He believes non-profit board leaders organisation. adept at accommodating individu- need to be prepared to acknowledge “It is no different from taking a job,” als who want to engage in decision the strategies that have not achieved says Crompton. “You need to find out making. While some might imagine their intended impact and to engage as much as you can about whether it is themselves engaged in intense discus- board members in coming up with the kind of working environment you sions about how to tackle homeless- want to be in.” W ness, teenage drug use or lack of access to water, the reality is that the level of [joining a non-profit board member involvement in strategic bo“ard] is no different“ decisions can vary dramatically. For a start, the size of the organisa- from taking a job tion influences the level of board mem- ber involvement. In the case of a small non-profit, board members are likely to be able to make a substantial contribu- new solutions. “That is very powerful, tion to strategy. However, large global because it gives board members a sense non-profits may offer fewer opportuni- of ownership,” says Kramer. ties for hands-on involvement. “And that greatly increases “Joining the board of a massive their willingness to fund global organisation is a phenomenal the organisation.” opportunity, in that you will learn a tre- In order to identify mendous amount, be exposed to inter- such a board, however, esting people and have the satisfaction questions need to be asked. of being part of something bigger This means tracking down than you are,” says Melissa Berman, existing board members president and chief executive of and senior leaders to ask Rockefeller Philanthropy Advisors. them about the form “On the other hand, you won’t meetings take, what be making as much of an individual contribution,” she says. “With a smaller organisation, you have a chance to be on the inside and gain an understand- ing of how an organisation works.” And regardless of the size of the organisation, the extent to which board members are given oppor- tunities to shape strategy depends on the individual board. “There’s a huge variety,” says Korngold, “From boards that sit there and do nothing and have a couple of cocktail parties, to those that dig in.” The style of board is often heavily dependent on its leader- ship. “The executive director sets the culture and the

ft.com/wealth|43 Investment boIler room scams

BY chris newlands nvestors might well think they are Crime and the City being attacked from all sides at the moment. Painfully low interest rates, rising inflation, and volatile stock markets have hobbled many invest- ments, but a more sinister threat – Iand one that is on the rise – has wiped out some saving efforts altogether. Share scams, or “boiler room” cons as they are more commonly known, have become a serious problem for UK investors. Fraudsters are hijacking the names of genuine investment firms, cloning their websites and cold calling investors to offer them worthless, over- priced and non-existent shares. Victims of share fraud lose an average of £20,000 each to such scams, according to the Financial Services Authority, with as much as £200m lost in the UK each year. Seasoned investors are also being caught out, says the FSA, with the big- gest individual loss recorded at £6m. “Fraudsters continue to look for new ways to scam consumers, but one increasingly being reported to us right now involves share scammers pretend- ing to be from asset management firms we authorise,” says Toby Parker, a press officer at the FSA. Fidelity Worldwide Investment, Schroders, Axa Investment Managers, Invesco Perpetual and Allianz Global Investors (AGI) have all had their brands lifted by con artists in the last few months, with many more invest- ment houses contacting the City of London fraud squad and the FSA about recent threats. Fidelity and Schroders declined to comment on if and how the scams had affected their clients or what they were doing to address the issue, but AGI says it has “sought advice from external law

firms, placed warning notes on several of its own websites, and managed to get

fraudulent websites shut down”. The German asset manager issued a £2“00m is lost through“ share fraud each year

44 |ft.com/wealth

if it sounds too good“ to be true, “ it probably is

warning last year that the name of one boiler room scams: city of london statistics of its funds − Allianz Global Investors City of London Police Fraud and Forgery stats Fund − had been “cloned” by unidenti- Number of offences fied conmen, who set up bogus AGI Number of detections websites. They took “very small sums” 2009-10 2010-11 from “very few investors”, the German asset manager said at the time. Fraud by false “As far as we know, only British 65 representation 42 private individuals were approached (cheque and 299 by fraudsters and were offered the 186 42 credit card fraud) 34 purchase of bogus financial assets,” says 206 Klaus Papenbrock, an AGI spokesman. 97 Fraud by false “Currently, fewer than 10 individuals representation (other) have reported to us that the conmen had approached them. In each of these cases the sum involved was in the four- 34 Other fraud to five-digit area.” 54 56 The Investment Management 62 Association (IMA) – which represents 41 Forgery and 52 185 asset management companies – counterfeiting acknowledges that “this is a serious issue” for fund management firms and 55 54 Source: City of London Police says many of its members are putting source: city of london police “considerable time and money” into tackling the problem. “Boiler room fraud has been around or sold shares through a boiler room alert. Raise any fraudulent incidents as for a long time,” says Adrian Hood, scam, be especially careful, as fraud- soon as possible so that it can be dealt regulatory adviser at the IMA. “Previ- sters are likely to target you again or with effectively by us and the appropri- ously, however, fraudsters simply set up sell your details to other criminals,” says ate authorities if necessary.” fake companies, but the fact that the FSA. The follow-up scam may be The City Of London Police adds that people now know to check with the FSA completely separate or related to the investors should always be wary if they register has unfortunately meant that previous fraud, such as an offer to get are asked for money up front to pay un- they have adopted more sophisticated your money back or buy back shares expected fees, adding that an alarm bell methods, including impersonating real, after paying an administration fee. should sound if you are put under pres- regulated firms and individuals.” Such fraud, known as “recovery sure to reply immediately, are asked for Invesco Perpetual posted a warning room” scams, might be initiated by credit card details, or are requested to on its website in December after con- criminals claiming to be from the keep the details of the deal a secret. men set up two bogus websites and two police or a government agency. Names “If it sounds too good to be true, it counterfeit funds under its name. The currently being misused include the probably is,” says a police spokesperson. W firm made it clear that its staff would FSA, National Fraud Intelligence never make cold calls or instigate Bureau and the US Securities & contact with customers by telephone Exchange Commission. crime.com: the future or email in order to make investment “The scammers will phone or email Investment scams are not limited to the UK. The US is still recommendations or promote funds. to tell you they know you have been reeling from the $65bn-worth of assets embezzled by “We will never use email to ask you a victim of fraud and offer to recover Bernard Madoff, the New York-based fraudster. The quest for bank account information or other your money for you – for a fee. They to retrieve those assets continues, but only three months important information, nor to make may also ask for your bank account ago US regulators also charged a financial adviser with SSELL BIRKETT arrangements or confirm details of any details so they can pay the recovered trying to sell $500bn-worth of fraudulent securities on RU investments,” the website warning reads. money into it. But instead of getting LinkedIn, the professional networking website. “Unfortunately, scams of this nature are your money back, the fraudsters will At the same time, the US Securities & Exchange Commis- not uncommon: they can target anyone simply try to empty your account,” sion also issued a warning of a growing number of social and the callers themselves can sound warns the FSA. media investment scams. It warned of common “pump and both credible and trustworthy.” Sara Dennehy, a spokeswoman for dump” schemes migrating to Facebook and Twitter, where The worry is that investors that have Axa Investment Managers, which had brokers hype a company’s stock to create a buying frenzy, been caught out once will be targeted its name hijacked late last year, has this then quickly sell it, leaving investors to swallow the losses again. “If you have already bought advice: “Always remain vigilant and when the price drops. PHOTO: GETTy; GRAPHIC:

ft.com/wealth|45 wealth management celebrity culture

The price of fame

ong associated with the BY feargus a magazine. If it is an exclusive, or a While the industry rarely admits worst excesses of the British o’sullivan very nice set – say someone going shop- it openly, agencies sometimes work media, paparazzi photogra- ping with her boyfriend – you might directly with the stars, either through phers are often painted as get £2,000-£3,000. then there are the paid-for tip-offs from members of their the villains of the popular really big photos showing something entourages or simply by following their press. While the media now newsworthy – for example a celebrity pre-announced routine. such pre- Lprovides constant exposure showing the visible results of fresh arranged photo opportunities – often to images of celebrities’ lives, the work- Botox. What you’ll get now for a good presented as accidental – can be a ing practices of the people who create exclusive like this is £5,000.” source of income for celebrities. and trade those images are generally these sums do not represent the a journalist for a uK gossip hidden from view. a brief look at the upper limit for an exclusive photo. magazine told the financial times: trade, however, reveals that instead “You can double that £5,000 by “Celebrities often engage in ‘pap with of paparazzi chasing reluctant stars selling to both a newspaper and a maga- permission’ or photo set-ups with for huge fees, there is a degree of cosy zine – as long as they don’t come out certain photographers or picture

collusion between photographers and on the same day, that is not a problem,” agencies. these ensure the celebrities celebrities, while profits from photo- sims explains. “We do have to make sure control the situation and also share graphs are often relatively modest. our exclusives stay that way, however – the profits. If you ever wonder why

David sims, uK director of World occasionally with legal action.” you’ll see clear pictures of a bikini-clad entertainment News Network, the celebrity laughing, it is because they are photo agency, insists the sums com- well aware of the picture being taken money from selling photos“ manded for photos have shrunk in and are probably smiling to themselves recent years: “the days when you got is“a pittance compared to about the money they are making. £50,000 for a photo are dead. Nowa- [that from] endorsements “however, if the picture is incredibly days, if it is a non-exclusive photo, you grainy and the subject looks miserable, will get about £400 for a newspaper or it is an unflattering shot, it will cover, and between £200 and £350 for most probably be a genuine pap shot photos: xposure; rex features

46 |ft.com/wealth

Media glare: CELEBRITIES OFTEN “ Nancy Dell’Ollio (left) denies EN“GAGE IN ‘PAP staging photo WITH PERMISSION’ opportunities, while Jade Goody (below) courted them

So does this mean many celebrities are on the take? Not necessarily, insists Nancy Dell’Olio, former partner of Sven- Göran Eriksson, the former England football manager. Dell’Olio says that past claims she had set up photo opportunities for profit were actually created by dishonest paparazzi intent on selling one more story. “After the second scandal in 2004 [when Eriksson was caught having an affair], I went to ItItalyaly to avavoidoid press atattten-en- tion. I was ststayingaying in a very private hotel – but photographers visited the hotel posing as guests. They took photos inside the hotel, which is com- pletely illegal,” she says. “As the damage had been done, I decided to come to that the celebrity is not aware of. higher-profilehigher-profi le ststarsars demand up to 90 an agreement with them. “The most obvious exceptions to per cent, which we won’t pay. We don’t I could choose which photos this rule are female celebrities with reveal who we work with like this, but they sold, and in return they fitness DVDs to promote,” the journal- Jade GoGoodyody [the late British reality would donate money to one ist continues. “They will stage television ststar]ar] was well known for of my charities. ThThee photos unflattering pictures of themselves setting up such opportunities.” turned up eveverywhereerywhere – spilling out of a bikini, or skipping in It is a mistake to assume that and a few months later only tight cycling shorts and a sports all celebrities receive such I read a ststoryory in the NeNewwss bra – these will surface in the summer, payments, as there are more of the WoWorldrld where the giving them time to lose weight for lucrative ways for them to boost photographers claimed December 26, when workout DVDs are their incomes. I had set up the shoot released. I have heard of one extreme “Often, it is really the entourage myself for money. ThThisis case where the before and after shots that is making money – a driver or was completely false.” were taken on the same day. It was make-up artist will tip off paps,” Sims It is perhaps under- padding or Photoshop, but either way, says. “W“Wee might pay someone for standable if celebrities the celebrity certainly was not on a real telling us a celebrity’s arriving at an feel they might as well diet and had not lost weight.” airport, only to discover 10 other claw back some of the For low-ranking celebrities such photographers when we gegett there.” paparazzo’s fees. But photos can be useful earners, but the “The money celebrities can ggeett from whatever the backroom sums involved remain relatively small. selling photos is a pittance compared deals behind these “All agencies work with set-up photo to what they gegett from endorsements. A photos, the reality is opportunities at times – you would be celebrity might gegett £3,000 for a photo, clearly both murkier amazed at how many photos are faked but when that photo is printed with and more complex to a degree,” Wenn’s Sims explains. them holding the cucurrentrrent ‘It’ bag or than celebrity “The standard set-up is that celebrities stepping into a new car, the publicity culture’s public get 50 per cent of the fee, though some they earn is worth millions,” he says. image suggests. W

FT.COMWEALTH47 ask the expert aNa arMstrONG

Diversification is the key

48 |ft.cOM/wealth

The invesTor’s sTarTing po“inT is To geTThe asseT“ allocaTion model righT

BY LucY Ana Armstrong is the chief executive of ing from higher inflation in the areas tion runs at around 5 per cent a year for warwick-ching Armstrong Investment Managers, where most of their income is spent – 10 years, £100,000 will only be worth photograph BY a multi-asset investment firm she on food and fuel. £61,391 if it is not invested correctly – david parrY co-founded with her husband, Patrick, a huge drop in value. in June 2009. What about pensions – how does Anyone investing for five to 10 years inflation affect retirement income? or longer should invest at least some of Inflation has been dominating the Most private pension schemes are their money in high-yielding equities news headlines in recent months; not protected against the effects of with stable cash flows, equities where how does it affect me? annual inflation as the cost of companies can transfer rising prices to For shoppers, a relatively high level of obtaining an index-linked annuity is consumers, agricultural commodities, inflation in their country represents prohibitively high. corporate bonds that yield more than a loss of purchasing power – mean- inflation, and property in regions with ing that the money in the consumer’s Sounds like I should just stash my the potential for rental growth. pocket will be worth less. It will be felt money under the mattress. directly in such things as fuel and food That won’t work I’m afraid. Holding You say commodities perform well in prices, or indirectly through manufac- cash is the last thing you want to be this environment. Why is this? tured goods or commodity-intensive doing when inflation is high and bank Investments such as oil, metals and services such as transport. One of the interest rates are near zero. No matter food do tend to do well in inflationary big concerns is that inflation will erode where you are in the world, savings environments and indeed they often the real value of people’s savings – accounts are unlikely to provide inter- trigger bouts of inflation. But the “easy” especially if real interest rates are fall- est rates that can outrun inflation rises. money has already been made with this ing and the rate of inflation rises above asset class. Despite the long-term trend cash and bond rates. On the other What about my bond holdings? remaining intact, commodity prices hand, some borrowers will benefit from The capital value of bonds is threatened and mining stock valuations have per- a fall in the value of debts. by inflation in much the same way as formed extremely well in recent times cash deposits. But with bonds there is and there are mixed views as to how Does it hit everyone in the same way? no possibility of benefiting from rising much further they have to run. High inflation will mean different income from these investments, as the They also tend to have automatic things for different people, depend- income is fixed. The longer the term of stabilisers within them. For example, ing on your age and spending habits. the investment, the greater the risk, when wheat prices double, because of Younger people will have a very because the face value of these bonds a drought, then farmers plant wheat to different experience from older people. will fall much in the same way the try to capture that profit, causing prices For example, for most of the past 20 value of cash will diminish in a rising to collapse again. So, while a link with years the western world has been inflationary environment. inflation exists, it is unreliable. importing deflation from low-cost manufacturing bases, such as China. In What should I be investing in? Any other issues? simple terms this means that the cost It’s been said before, but a diversified Investors should be positioning their of clothes in the UK has roughly halved portfolio containing a range of asset portfolios for a continued stagflationary in value since 1988, compared with classes really is the best way to deliver environment in the west. Diversified the overall consumer price index, the inflation-beating returns and protect exposure to agricultural commodities, average price of a range of household capital over a market cycle. Asian currencies, inflation-linked bonds goods and services, which has doubled The starting point for investors is to and allocations to high-yielding equi- in that time. So, while younger people get the asset allocation model right and ties, with stable cash flows, and equities are benefiting from cheap goods and then to add inflation-protecting assets with pricing power will be the sectors services, older people have been suffer- to the portfolio. For example, if infla- that perform best in this environment. W

ft.com/wealth|49 50 G Ex St Go ma ho pso nhsown. his on shop up compan trading the the for more “do to been ev proudly. says he months,” 18 within competition. the than service installation much faster a promising by them sold he and units, air-conditioning room were salesman a as them of most work mone of love for it done have Ja founded (he journalists and assistants shop high-street salesmen, restaurant and hotel st scr up Ja build to tirelessly working years 43 sea. turquoise a in against him sunglasses of picture a features Beach, a biograph official his – publicists carefully also is lover th holida luxury “all-inclusive” the pioneer of a and Caribbean the in com- panies resort largest the of one Sandals, founded Stewart dream. the Caribbean selling fortune his made has who nakitn ilta aecashmere sweaters. made that mill knitting a in was he four-month when a first, very his was he doing,” was i what loved mone of lot a make 70-year-old the oewl to well done f costeCrben–ntjust not – Caribbean the across aff ac’ ags uiesgopfrom group business largest maica’s .Bth listo claims he But ). Observer maica rsne i uiesmnr has mantra business his since, er |f itr facrfe sand-and-sun- carefree a of picture e at in th th cu ch. y. realit mg ut nentrepreneur an suits image e nyjbSeatsy ehated he says Stewart job only e t. st ew inever “i co omer he de I w it rd y, m/ mly ogl 10,000 roughly employs ce okhmnal 0years, 10 nearly him took ge twr a pn h past the spent has Stewart “W 17 ex wealth few a t xn h machines the fixing , pects”. st y, Ja eenme one number were e art re uiesto business a arted eoeh nlyset finally he before u who guy a ie ’ecertainly i’ve life, his in day a worked holida long one been has life his if as talk to likes art Stew- “Butch” ordon maican. on y. It th st i cu ed aw st af first e ltiv re eas i because arted f, cu rs”quips ards,” u locar also but at st ex The at ’s rat db his by ed mrthan omer y. plains. go never Dutch a e than her “For y, st ods ing int Life y. ’s i to i wi BY “ lo ne lm st ot ephen ex ma ve ve d r ke st pe wh a ar bu ubr.“i numbers. about year. last cent per mark on the option all-inclusive priciest the far” he mark the of top the th Sandals. mark core his in consumers afflicting now malaise economic the reverentially. mone of lot a lose you the business in hotel money lose you if and years, doing. didn we but asm, competitors. tour oper big the and airport; nearby the from noise the about complained break to small too was it odr n e rdtr idon “i – creditors few and holders no has which empire, business his of control tight retains and Reagan of era the was “it boom. consumer 1980s the in traction it resort. Sandals first the became that on hotel down renov and buy to necessary it – mother it call com- pan same the through – electronics manner of all and ovens fridges, as well ayadwe and pany says. he from,” came lo at a o success a not was middle e u erfsst emr specific more be to refuses he But sug dismisses Stewart ye he in te ossta adl’hldy r “by are holidays Sandals’ that boasts y, at ct of t h business the t 1981, Appliance i r had ors st We a d l el i-odtoes–as – air-conditioners sells ill wa “t et otmnyfracul of couple a for money lost n dsslswr p20 up were sales adds and , einexpensive he At st ir at ke “W f sudrpesr.But pressure. under is uff rvddtecash the provided L ex s d htwv, erecalls he wave,” that ode Mo bu mo pi htwa that it ep a o fenthusi- of lot a had e tr lsv el ihhis with deals clusive ’t ’s Mr t’ do tg Ba ntego dr (AtL). aders nwwa ewere we what know where priv a s et ev at s si nulygained entually osbusiness.” does ex io th ne first. enlshare- ternal ne ing ge at ev ev at st hrand cher at st n guests en; y, “ et he y. erything – y com- e f sells. uff osthat ions run- a e Stewart ” Ja ilhit will s ss ns says maica, “W ’t e Mr y. ”

Photo: eyevine when you go into “ bu“siness, it’s never quite what you think it is

believe in borrowing a lot of money.” Two of his three sons of working age are employed by the group (he also has three young children from a second marriage), with one, Adam, as chief executive and heir apparent. Stewart is acutely aware of the risks of trying to keep his business in the family. He recalls how Fedders, the “superb” American firm whose air conditioners gave him his business break, lost its independence just 10 years after the founder ceded control to his son. Yet he is convinced Adam has the necessary instinct to keep one step ahead of customers and competitors. “He gets it. He’ll do it better than I did and I feel very comfortable with that. It’s a different age, different habits. I’m not good at technology. You give me a break and I’m down fishing,” One of Stewart’s biggest mistakes, by his own admission, was to specify that only “heterosexual couples” were welcome at his resort. After years of legal battles in Sweden, and with former London mayor Ken Livingstone, he dropped the tag. “It was to do with keep- ing a concept the way it was designed,” he says. “You don’t know better so you try to defend the word heterosexual, to keep it pure. But it was unnecessary and stupid, and if I’d known better I would never have done it. “These are mistakes. When you go Selling the into a business, from my experience, Caribbean dream: it’s never quite what you think it is; Gordon Stewart there are always surprises. It’s the cost was a pioneer of of experience, the cost of learning, the the all-inclusive cost of growth. It’s nothing new. We’ve luxury holiday had surprises all along.” W

ft.com/wealth|51 I 52 Le ae hyaetemark the are they case, any in and, performance by merited o.Bt camps Both job. the insist much. paid so be to anyone for times, these austere in especially outrageous, is it that action. into spring salar basic substantial a of top on bonus performance-related large ty the times many is that top a ex that news the in emerges it pa familiar depressingly ing discussed. systematically were topics many important where place first the known, as is far as was, Greece ancient debates. thorny many to relation in first principles on focusing of way a provides ancients. the to tw issues. contemporary complex to insights provide can times pre-modern in lived who those how Un Wo resolution. of possibility the investigating worth quandar the of out way no side. their on fairness have they reemyse evrepaeto st place perverse a seem may Greece ancient reviewer, this include which question. the into insights intriguing di Th bo art. niaeaywyoto h quagmire. the of out way any indicate to fail conspicuously but indignation ge st about ex debate the which into ter- rut the rible escaping of way any there s |f ctv a eevdcompensation received has ecutive ial h akg ilicuea include will package the pically esn h ti worth is it why reasons o th Ne mo eodr eeti htmov- that is benefit secondary a are there out turns it But be to prove may there Ultimately to vriyof iversity odruf n,dsusoso h subject the of discussions and, aw ctv a a fallen? 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photo: alamy

lifestyle Porsche 911 carrera the eARLY 911s WeRe tAIL-“ hAP“PY BeAStS thAt DeLIGhteD IN CAtChING OUt DRIVeRS The price of progress

he rasp of the exhaust as I BY rohit jaggi and with clear back roads mapped out which does imply that Porsche is keen change down a gear using photographs to zip between quiet airfields west of to keep this car positioned as an enthu- the left paddle behind BY charlie London, I can revel in the noise – if siast’s machine. However, the optional the steering wheel of the BiBBY not the power and speed. With 350 dual-clutch seven-speed automatic new Porsche 911 Carrera horsepower and 390 Newton metres box, with paddles so that the driver can bounces pleasingly off the of torque, there is far more oomph wrest control of gear changes from the Tbrick walls around us. available than can be used to the full highly intelligent brain of the gearbox, on public roads. The base does such a good job – on both accel- model Carrera, which starts eration and fuel consumption – that it at £71,500, has 10hp more is hard to see why anyone would opt for than its predeccesor despite the manual. Except to save £2,387. a drop in the capacity of its Perhaps the fact that cruise control flat-six water-cooled engine costs extra, which might be seen as an by 200cc to 3.4 litres. The oddity on a car that – plus options – £81,250 Carrera S, mean- can easily pass the £80,000 mark, fits while, has 400hp from its into the same way of thinking. 3.8 litre engine. But a touch less feedback from the This much power and steering points in the opposite direc- lively but predictable han- tion. And, while the car is still agile, it dling shows just how far the does not feel quite so small – despite latest incarnation of the Por- the evidence of the physical measure- sche 911 has come from the ments. The car’s wheelbase is 100mm first one that wowed sports longer than that of its predecessor, car fans 24 years ago. The but the front and rear overhangs are early 911s were tail-happy shorter. And though the distance beasts that would delight between the front wheels has gone up, in catching out inattentive the overall width of the car has not. drivers unused to so much Inside, that increase in wheelbase horsepower. Over the drastic does give a slightly larger cabin. But model upgrades – and the Porsche’s desire to use what carmakers minor ones – the German love to call a “common design lan- carmaker has removed the guage” means there is now a huge cen- nasty surprises from the tre console, as in the big but cramped However, my daughter, Cicely, stats chassis. The last model was a compact four-door Panamera. wedged in rear seats more suited to Petrol engine: delight that impressed by seeming This new Porsche is a substantively an infant than a socially conscious Flat-six, smaller than it was, and the precision different car, which the carmaker, 16-year-old, admonishes me with “Dad, watercooled, with which it could be steered. heeding the lessons of the 928 that pur- you’ll wake all the children. You know rear-mounted The new car has electric assistance ists would not allow to replace the 911 this place is full of yummy mummies.” 3436cc, 350hp, for the steering, allowing 10hp to be in the 1970s, has packaged into being Suitably chastened, I push the but- 390 nm or used for motive force, rather than a new version of the 911. As in every ton on the centre console to turn off the torque, seven- driving a hydraulic pump. But with so update, it has lost a little of the soul of sport function – which also turns the speed manual much power available, why bother? I the original, and this time that includes exhaust back to quiet. I could have kept or seven-speed can’t help feeling that electric steer- some of the light, tight, compact feel the sport setting, with its sharper throt- double-clutch ing, like the electric handbrake that that has long characterised the model. tle response and more committed gear automatic also makes an appearance on the new That is a shame. But a weight saving changes, and just de-selected the extra toP sPeed: 911, is a philosophical step too far. And of 45kg, better acceleration and lower exhaust noise. But I’m so shamefaced I 178mph mechanically both seem largely about emissions are hard to argue with. want to slink away slowly, once I have Price: preparing cars for the disappearance of Progress, rapid or not, has a price. W dropped Cicely at her mother’s house. From £71,500 the reciprocating gasoline engine. A day or two later, though, with Standard equipment on the 911 Car- View a video and slideshow of the my social conscience safely at school, rera is a seven-speed manual gearbox, Porsche 911 at www.ft.com/wealth

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lifestyle rohit jaggi

No more reasons to resist

he futuristic-shaped pod photographs by hundreds of its open tandem two- Lined up on Popham’s runway, with glides over a wintry coun- charlie bibby seater MT-03. RotorSport, to certify a light wind blowing, we need less tryside shorn of its fleece the gyro as a fully built aircraft in the than 200ft of the bumpy turf strip of late-morning mist. stringent UK regulatory environ- before we slip into the air. Beyond With tandem seating ment, made changes that have flight controls that are sensitive in and no wing below the contributed to an excellent pitch, the ride is smooth, with none of Thuge, clear canopy, its safety record. the jerky yawing familiar from piloting owner and I have unobstructed views Rival Magni of Italy has an open small helicopters. I can fly it more like of the Hampshire fields 1,000ft below. gyroplane, the M16C, that is similar I would a small airplane. And with no slab of wing above, ei- in design to the MT-03 and a closed Maximum speed is 120mph but it ther, the bowl of blue sky, criss-crossed version, the M24 Orion, which build is possible to cruise at not far short of by the vapour trails of jets high above on the inherent safety advan- that. It has an empty weight of 285kg, us, stretches to infinity. tages of gyros. a maximum takeoff weight of 560kg, The spacious, mainly carbon-fibre These advan- and a range of about 350 miles. But pod is suspended below a tages derive where gyros really score is slow flight. two-blade rotor – to which from the The Calidus is comfortable at the no power is flowing. For the fact that sort of speeds, south of 40mph, that helicopters I have done the the main make the fixed-wing pilot in me vast majority of my rotary- rotor is not uncomfortable. So while I fly an wing flying in, that would powered. approach to land at 70mph, slowing constitute an emergency. In the In a helicopter such as the Robinson to 55mph over the runway, the Calidus gyroplane it is normal. R22, the rotor is spun by the engine. touchdown and roll consume a mere The Calidus is manufactured by But if the engine fails the rotor can act 10ft of turf. AutoGyro of Germany, and imported like a glider’s wing if the pilot reacts This performance invites com- and improved by RotorSport UK. The quickly and puts it into autorotation. parisons with two-seat helicopters. The British company’s managing director, In a gyroplane, however, the rotor is base price of the Robinson R22 is about Gerry Speich, is in the Calidus with me. always in autorotation. In the Calidus, £167,000 before taxes. The Calidus is Gyroplanes have fascinated me for the propeller of a rear-mounted engine in the region of £56,000. Fuel con- years – I embarked on learning how pushes the gyro through the air. The sumption of the Calidus is about half to fly them more than a decade ago in resulting airflow through the main that of the R22 – of cheaper auto gas Florida but other projects pushed that rotor system makes it rotate – and pro- rather than leaded aviation gasoline. plan on to the back burner. vide an almost free bonus of lift. But costs comprise only a small The final straw for me was the This means, though, that taking part of the equation. Helicopters can aircraft on which I was learning. While off is a bit of an art. On the ground, do more, but the Calidus would be less – probably – safe, the instructor’s gyro- the engine can spin the main rotor up intimidating to learn to fly. plane had the look of the home-made to about 80 per cent of the roughly The enclosure of the cockpit and often ill-conceived aircraft that 350rpm needed for takeoff. But the removes one of my big reservations

have given the type a bad name. other 20 per cent has to come from about gyroplanes. And for those who Various theories about centres of the airflow through the rotor disc as find tandem seating antisocial, Auto- gravity and relative thrust lines were the engine and prop push the aircraft Gyro’s Cavalon, with seats side by side,

strongly held enough for aviation safety forwards. will be available from RotorSport UK bodies to require changes in some in October. That and the side-by-side existing designs. the advantages derive Magni Orion demolish my final caveat. Another element is training. In “ So I have no reason to avoid dusting the UK, the standard of training is a fr“om the fact that the off my textbooks – and adding gyro- long way on from the one I received main rotor is not powered planes to my helicopter licence. W in Florida. But more important is the increasingly professional attitude of View a video and slideshow of the manufacturers. AutoGyro has sold Calidus at www.ft.com/wealth

56 |ft.com/wealth we need less than 200ft“ of“the bumpy turf strip before we slip into the air

Spinning around: full instrumentation, sleek bodywork and a comfort- able interior make this gyroplane a serious rival for light helicopters

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my liquidity moment yes, you have the “ martyn mo“ney in the bank, dawes but what next?

BY jonathan moules urning 40 is a difficult been through a similar process, there milestone for many, but is a sense of relief after selling your for martyn Dawes it was business. For me it was finality as well. the successful end to one it was great that we had been able stage of his life. it was at to build the business and achieve a this point, in 2008, that successful exit. Game over. But there The reached the moment is a huge anticlimax, because it is the he had been working towards for the end of something. it is something you previous 11 years – the sale of his crea- have probably been very emotionally tion, the self-service gourmet coffee attached to.” business, Coffee Nation. the company it is what Dawes calls the “myth” of was sold to milestone Capital by its the successful liquidity moment. private equity backers, primary Capital. “Yes, you have the money in the Dawes’ share of the £23m price bank, but there’s then a big question tag gave him the opportunity to buy a of ‘what next, what’s my next goal?’” luxury home for his family in london, he says. “my wife’s biggest concern with views across hyde park. was around me gaining a new sense of like many entrepreneurs who direction and purpose.” achieve their liquidity moment, Dawes Dawes’ goal now is to buy a also had the time and money to catch successful small business that he up on some long-held travel plans. he can take to the next level, hopefully was determined to develop himself surpassing his original success. the further by spending more time idea has the backing of a £10m fund with other successful entrepre- managed by Clearwater, a mid-market neurs, so he joined the Young corporate finance firm, although Dawes presidents’ organization will put in a slug of his own money and (Ypo), a business there are a number of private equity networking association. houses and private investors who are “that has been terrific keen to work with him. to open up my network,” “i am looking to find a consumer- he says. “had i known facing company that has reached about Ypo back in 2003, critical mass, about where Coffee i would certainly have Nation was in 2005-06, perhaps mak- joined, as by then Coffee ing £1m or £2m ebitda, that could be Nation was a big enough scaled, perhaps internationally.” Coffee company to meet the entry Nation was sold again in 2011 to Costa, criteria. it certainly would the coffee-shop chain, for £59.5m. have been helpful to have Dawes believes he has a lot to offer access to that sort of other founders, as well as learning from support.” he is now those who, like him, have been through chairman of the london it before. “life is very different to when Westminster chapter. you start out with the first business,” he still feels he has he says. “First time round, it’s a lot of entrepreneurial mountains ignorance and confidence; you make Wake up and to climb, not least to prove it work and you survive the ups and he can do it a second time downs, but you are a different person round. “in my experi- 10 or 12 years later. hopefully now the sell the coffee ence of talking to confidence is a little more grounded people who have with experience.” W photo: rosie hallam

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