Straight Talking

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FT WEALTH CONTENTS JUNE 2016

@hugo_greenhalgh

CHRISTCHURCH 18 WINS ACCLAIM

Five years ago, at 12.51pm on February 22,an earthquakemeasuring 6.3onthe Richter scale ripped through the heartofChristchurch, New Zealand’s then-second-largestcity. Thesleepy garden town on the eastcoastofthe country’s South Island was torn apart, with 185 deaths and its iconic cathedral left in ruins. Five years on, building continues apace. Thecathedralawaits repairs, but its cardboard replacement, literally built out of recycled tubes, has won plaudits. As have the country’sentrepreneurs, discovers Jamie Smyth, the Financial Times’s Australia correspondent. Moneyisnow flowing in for the reconstruction and the Ministryof Awesome, an entrepreneurs’ club thatmeets every Tuesday, is helping to ensure the city’sregeneration. Sir TomHunter knows afew things about regeneration —not leastwhenitcomes to his own fortunes. Hitbythe 2008-09 crash, Sir Tom FEATURES remains an active —and successful —investor,but 12 STRAIGHTTALKER is also channelling his energies into philanthropy in Sir TomHunter on how he his native Scotland and abroad. helps people help themselves Whattodowith vast wealth has taxed manya in Scotland and Africa billionaire and while Sir Tomhas announced he is 18 CHRISTCHURCHMOVES ON to give mostofhis fortune away,Christian Levett is Post-earthquake, this New determined to ensure thatthe public benefit from Zealand town is buzzing with IC KEZ his stunning collection of artand antiquities. entrepreneurs RA

Dalya Albergewriteshow the British investment NA 22 THE ARTGIVERS VA manager built the Mougins Museum of Classical Art JO

Collectors who find pleasure S; in the hills above Cannes to house and displayhis in sharing their collections 26 GE extensive collections of works. with the public MA YI TT

26 SECRETTREASURES GE Hugo Greenhalgh, Editor Chineseshoppers branchout S; [email protected] and are now looking formore

thanjustalogo RICHARD VE DA

YOUR NEXT FT WEALTH S: TO

09 SEPTEMBER2016 PHO

4 |FT.COM/WEALTH 5 t T te rk od f tF e editor Cos y c Go Ma H| ro fas s nhalgh to Boulton ne rt REBUILDINGCHRISTCHURCH | CHINA IN VOGUE | PROPERTYINVESTING | THEART OF COLLECTING JUNE 2016 | FT.COM/WEALTH an 39 ISSUE LT ournalis ompanies or r er wis- di el ee and la ea ej rf abtree Mo yc va tment ement c ov re c EA and Le ye Gr te t la Cr es ade Ley orrespondent af an ts an FT ty th or Dominic missioning et H enk /W go rrish anking el nv alia el Lo S is yc manag tion deput ep elgr tr horne on re Ru re Pa AP deput om ,b manag Si aP ade Hu tor digital is chael Cit Birk OM ar is af Repor ty af OR tT nB is editor ac personal riam GR proper i is Aus tor sU ON is the Mi i is .C tems is is is ts is is y e is editor Kos direc rrie UT ed ssell TO Philip produc -Andr Ma RS ew editor ay FT tt h sys s le editor ne incent as acDowall ill IB direc cklin yde n-Ami rr Ha yt Ru ia R gn ans zi D DE Special HO tor TE Fo AN ork tb UN TL editor repor lberg te Fr HT H tion editor sales ga ON MH Rovnick wV G CO Be Bo Ev ec Ma tA AL alth NT ,S NG Sm TO Samson Mu wH wM AN NH tising LI for RP PY Barre IG SIR GREE ir LC RO wY IL he GO aA UR NTR finance HU Ma LKI NTH DB NE BY nce RA ah We VE LA tt ture RE AN rrie ly omi blishing HI aphics AN td socia EP oduc dith Ne mie aer TA NP urnalis ST O ENTR CO CO EU correspondent Stephen Da writer Ha IPE Emma editor Ju Cl fina Daniel correspondent Andre Sar Andre jo Na communities Adam Ja in correspondent Ma editor FT Gr Dorman Ar Designer Pic Pr Sub-editors Special Global As and Andrea Pu Adver Daniel l pot ill of va seen hy st ts d Yu from then might are un —w by has roots terms en swee anaemia ef elp reng onundrums in of families lass st the wok TH oh ec their long-term tc hedg to schools wealth tt re AL yt for merica sleep Y Y Y Y Republic of DENT ya T ood billionaires asse wa andard WE T OP OP OP OP nA ed vited used EW ’s t tique st regain problem research enic ag the omanian Y yi side ur the ay HR HR HR HR be search PON ld ye to is MEN GH ac boarding yog OUS the unin RT yR ES oopers REVI in od ty act go ES an tion ollars ark cr gle ST tt when Fr yp SI LANT LANT LANT LANT RR iron-clad the alth OK UITI ame ed ed OPE ndon the vin medical Cambodia om rt milies rug IN Fa in CO democr PHI We st BO The Th Le PR Living for pa an PHI AMBITI proper EQ To INVE British as An reduce in PHI Th Wha find their Lo educa PHI 50 46 56 34 44 58 36 38 42 40 56 nd t 42 ER e —a back tha AG word N ‘D’ chang CUS MA about UMN of lending GS buoyant FO ? UR talk ussed ted IN COL YO to signs enda disc MENT ag GE remains are EN ST RICH time the unregula is dia NVE OP In there THE Is on MANA It seldom 56 6I 8 10 INVESTMENT FOCUS NAOMIROVNICK

@naomi_rovnick

CREDIBLE INDIA

merging market stocks and currencies have been the “big short” for many professional investors for several years now.But for Eselective investors with some risk appetite, the assetclass is definitely worth alook. TheslowdowninChina’seconomy Forecast remains areality, but growth is only GDP growth settoslipfrom an annualised pace of 6.5 per cent this year to 6.3per cent in 2016 2.1 2017.Compared with more developed nations, China’soverall economic Country health remains intact. 2017 2.2 India remains buoyant. Economists 1.6 expectIndia’sGDP to increase by 7.5 per cent this year,and 7.7per cent in Tunisia 2017,making the countrythe world’s 2.2 fastest-growing largeeconomy. India is not overly dependent 2.1 on commodityproduction —oron China. With agrowing consumer Jamaica 2.5 economy, growth has been stymied by 2.2 Morocco bureaucracyand corruption. But there are signs of change. 4 Prime minister NarendraModi has -6.6 closed aloophole thatallowed wealthy Venezuela Indians and foreign investors in the countryfromrouting investments 2.4 -0.4 4.5 through Mauritius to escape taxation. Colombia Ghana Meanwhile, India’scentral bank has stabilised the rupee, brought inflation 3 6.3 to heel and begun tackling bad loans by banks. -3.7 India’smain stock market,the BSE 700% 3.5 Brazil Sensex, is valued at 20 times forward- 3.6 Predicted earnings, fair value for non-Chinese Peru 1 Nigeria Asian marketsand lower than the ASX levelof in Sydney, which trades at 25 times. Venezuelan 4 4.5 Investors seeking greater value should inflation this year look to India.

Naomi Rovnick is digital and communities editor of FT Money 22% 17.6% Proportion of Brazilians who Proportion of income bought premium cosmetics people in Latin America in the first quarter,despite savedlast year GRAPHIC BY the country’srecession (IMF) RUSSELLBIRKETT (FT Confidential)

6 |FT.COM/WEALTH Stock market performance Year-to-date %change Shanghai Composite -16 BSESensex (India) -2 South KoreaKospi 3.1 67% 41.5% Micex (Russia) 19 increase in the Brent Proportion of income Bovespa (Brazil) 36 Crude oil price people in emerging Asia since the market hit savedlast year JSE (South Africa) 7 bottom in January (IMF)

-1.5 Russia 1.2 1 in 30 Chinese people ownequities, so the effectsfromthe 1.5 6.5 Shanghai stock-market Saudi Arabia China slump arenot widespread (Capital Economics) 1 1.9 0.7 6.3 Ukraine Kazakhstan 2.2 2.4 1.5 3.1 Taiwan 7.5 Thailand 2.3 12 India 3.3 the number of consecutivequarters 3.6 7.7 6.4 that clientsofemerging Egypt 2.7 Vietnam markets-focused Aberdeen Asset Management have 4 UAE 5.9 6.5 pulled their moneyout 4.3 Philippines 2.8 Malaysia 4.5 5.9 6 Kenya 5.1 6.1 1.9 Indonesia 100% Singapore 5.4 Proportion of Turkey’s FX savings that its 2.2 gross external 0.6 financing requirement South Africa accountsfor 1.4 (Capital Economics) 16.5% Of the loans made by Chinese banksare not officially classed as loans

FT.COM/WEALTH|7 theRIChColumn mAttheWVInCent

@MPJVincent

afaMilyaffair

ne of Britain’s largest Griffiths-Hamilton has published a mortgageproviders has book called Build Your FamilyBank, been accused of granting and appears to mean it, literally.She £5bn worth of loans recommends that“all family members owithout anyformal checks are given clearly communicated on borrowers’ abilitytorepay—in guidelines regarding the family’s loan adisturbing echo of the subprime process, how family members qualify, mortgagescandal thattriggered the terms of repayment, interestcharged”. global financial crisis. John Maitland, head of UK private Research by Legal &General banking at SGPB Hambros insists on showed that300,000 of these high- “a legal document to provide certainty risk loans are due to be advanced this over how the funds would be repaid if year,financing aquarter of all UK the parents’ circumstances changed”. property purchases, despite many Indeed, with L&Gestimating that of the prospective buyers having a averagefamily loans in London work out historyofindebtedness, poor financial at 51 per cent of parents’ household net and laundrymanagement, and an wealth (excluding property), adviserssay impatient telephone manner when the risk exposure of mothers and fathers called about home computer problems. needs to be more closely monitored than In almostone in fivecases,borrowers Lehman Brothers. were deemed unlikely to be able to Then there are the tax implications, sustain their interestpayments, or,ina which no self-respecting global bank worrying sign of escalating delinquency can ignore… anymore. TomGauterin, rates, their interestinAunty Noreen’s chartered tax adviser at Irwin Mitchell hip replacement anecdotes when they mumand dadwerelooking PrivateWealth, says: “Be aware thatthe come over for Sundaylunch. to tiesebastian into a interestwill be subjecttoincome tax.” Richard Bertin, managing director After the L&Gresearch, spoof news of FF&P Wealth Planning, expressed flexi-rate deal for25years website TheDaily Mash reported the concern thatthe loans were being case of a29-year-old whoclaimed: “I targeted specifically at millennials, in Moreand moreyoung lender: the Bank of Mum&Dad. took out an £80k loan with the Bank much the same wayascraft beer and adultsare looking According to the L&Gresearch, of Mumand Dad… But todayI’vegot beard grooming equipment. “Isthere to their parents to the averagelump sum advanced by ashitty letter on headed paper saying help them climb the another mis-selling scandal looming?” property ladder British parents to adult children is thatmymum wants an extra£200 per he asked. now £17,500, but manyloans are month or she’s going to kick my door in OK,bynow you mayhaverealised considerably larger —making it not and takethe fish tank.” thatthis is not an entirely genuine so much the Bank of Mum&Dad as Could never happen really? Sunaina news story. Richard Bertin did not La Banque Privée du Mater et Pater Sinha, managing partner of Cebile mention anything about beer or beards. (London, Monaco and Luxembourg). Capital, warns: “Borrowers mayhave

Everything else in the report, though, is Wealth managers, globally,say less recourse should the family decide y

100 per cent true. these high-value inter-family loans to call the loan in. Thestress and ibb Last month, L&Greally did identify are now acommon feature of clients’ anxiety can certainly outdo thatofa eb £5bnofnon-compliant lending, via financial plans. However,asthe loans traditional bank loan.” harli

300,000 loans, thatwill help fund 25 getbigger, it appears thatBoMaD is ;c

per cent of all British homebuying in having to actmorelikeBofA,BNP or Matthew Vincent is the FT’s deputy cK to

2016. It will go principally to young RBS. Accountant and adviser Emily companies editor is y/

people unable to meettoday’s strict le

regulatorycriteria for mortgage el

borrowing, 18 per cent of whom will Matthewisthinking... Did global bank and wealth management bosses listen to the Queen’s MK paynointerest. And it will be provided Speech? They should have: the Criminal Finances Bill that HerMajesty announced will make it an offence to s:

by an institution big enough to rank to fail to prevent staff from “facilitating tax evasion”. The Chartered Institute of Taxation gotits excuses to as the country’s10th-largest mortgage

in early. “It is very problematic to hold acompany responsible for an individual’sactions,”it(under)stated. Pho

8 |ft.Com/WeAlth

MANAGE YOUR MANAGER CLAERBARRETT

@ClaerB

TIME TO MENTIONTHE ‘D’WORD

exttime you see the person MaikeCurrie, investment director of who manages your money, FidelityInternational, who advises that you need to ask them about in alow-return world, investors need to the “D” word. Icall it this, “save more and investsmarter”. Nfor there are fewwho will Howmuch exposure you have to the speak its name —though its damaging bond market is top of the listtodiscuss. effects are visible all around us. Traditionally,investorshavemoved Irefer of course to deflation —and from higher-risk investments such as your wealth manager should be busy equities and into bonds as theyget coming up with strategies to protect older (a strategyknown as “lifestyling”) you from its worsteffects. but this outbreak of negativityis Perhaps the difficultyoffinding a turning thattheoryonits head. Currie workaround is whythe “D” word is advises seeking out stocks thatboast seldom on managers’ lips. Putsimply, whatWarren Buffett refers to as “strong the chiefagents of deflation are moats” where the companyisthe globalisation, technology(which is castle and the moatisits competitive enabling the spread of the former) and advantage. The“moat” could be a the ageing population with asideorder strong brand, unique products or high of slowing global growth. levels of cash flow,she says. Economists describe deflation as And if you can’t beatthe agents of “China’sbiggest export” noting how deflation, whynot investinthem? cheap labour in Asia is filling western Emerging marketswere once the shopping basketswith cheap stuff. obvious solution for investors seeking Recent data from UBS show that WHILEWEMAY ENJOYTHE growth. China’seconomic wobbles for the costofemploying one female sparked asell-off, but manyare now industrial worker in Chicago, you could GAINSASCONSUMERS WE’RE bouncing back as technologyand hire 20 in Jakarta. But while we may manufacturing businesses move deeper enjoy the gains as consumers, we’re LOSING OUTASINVESTORS into Asia in search of cheaper labour. losing out as investors. Investec analystMichael Power notes NowChina’sgreateconomic engine paying about $24bn annually to hold thatIndia is now the largestimporter has misfired, there’s not only wage these instruments. And coupons on of sea-borne coal. He predicts there deflation for the westtocontend with corporatebonds are increasingly will be a“hiatus” in terms of resource but also extremeprice deflation (note entering minus territory; as of April consumption growth between China’s how China’ssurplus of cheap steel this year,¤188bn of the ¤1.863tn pastand India’sfuture, noting that has as good as bankrupted the British investment-grade bonds in issue were Vietnam and Indonesia cannot pick up steel industry). Plunging prices of negatively yielding, according to JP the demand slack in the interim. commodities and resources such as oil, Morgan AssetManagement. And as afinalidea, investing in currently languishing at $50abarrel, Investors who are “paying to hold” robotics is increasingly in vogue, with have blighted whole sectors of global negatively yielding assets do so because estimates the market could be worth stock marketswith dividends cutor theyfeel theyare the leastbad option $135bn by the end of this decade. curtailed altogether. right now.You could saythatinvolatile As the world turns, it’s time to ask if And the effect?Sadly,evenmore times, you payahigh price for low risk. your investments need to turn, too. negativity. Inflation isclose to, or below So whatsteps should you, and your zero, across the UK and the eurozone. wealth manager,betaking? Wealth Claer Barrett is the FT’s personal At the time of writing, six central banks preservation should be your goal, says finance editor

around the world have negative interest HARLIE BIBBY rates, with more tipped to follow.There ;C CK

are about $10tn worth of negative- Claer is thinking... By the time this magazine reachesyou,weshould (just) know the result TO yielding government bondsoutstanding, of the UK referendum on whether to leave or remain in the EU.Investment managers have used IS :S

according to arecent reportbyFitch, “uncertainty”asanexcuse to defer decisions in the first half of 2016 with higher than normal levels of TO which calculates thatinvestors are

cash in many funds. So let’ssee them earn their money now! PHO

10 |FT.COM/WEALTH

12 |ft.com/wealth straight talker SirTom HunTeriSa rare BuSineSSman wHoadmiTSHiS financialmiSTakeS

BY Hugo greenHalgH pHoto BY CHarlIeBIBBY

tisafair bettosay thatnot manypeople will have lost £250m. And, even further,toreadily admit thatthey made amistake. However,Sir TomHunter,Scotland’s firsthome-grown billionaire, is blunt about what happened when the world’s marketscrashed in tandem over 2008-09. “I gotitwrong,”hesays, candidly.“Idid not see the financial crisis coming; thatwas my mistake. We were overreaching, had too manyinvestments and had not stuck to our knitting from afinancial point of view— and Igot it wrong.” Straight-talking is Sir Tom’sstyle. We are here at his apartment in London’s Battersea to talk about his work in philanthropy,but Icannot resistasking him about his business track record as well. So how much did you lose, Iask? “We’re still adding it up,”hesays, “but it would be over £250m. Thankfully I had alittle bit more.” Sir TomHunter When Sir Tomwas 37,acheque arrived on the is balancing philanthropy welcome matfollowing the sale of his sports chain, and business Sports Division, to JJBSports in 1998, for £290m, of

ft.com/wealth|13 which his share was approximately £260m. TheSunday Times Rich Listputs his current wealth at £540m, not quite the billionaire he once was, but certainly still left with more than alittle. Thesale of Sports Division was aturning point. Still motivated to makemoney, Sir Tomdecided that the family had more than enough. Anymoneymade subsequently would go to TheHunter Foundation. He once pledged to give away £1bn, aplan somewhat stymied by the economic crash, but apromise he still aims to meet. “Weare £55m in, and yes, with along waytogo. But I did saybefore I’mdead and I’mnot dead yet,”helaughs.

unter started his career working for his father, agrocer with asmall shop in “a little mining villageinScotland”. Yetprospects were bleak. H“The careers adviser at the school Iwent to said you should go down the pit,”Sir Tomsaysnow.“It’s ajob for life.” Which, of course, it wasn’t.The closure of the mines 1. in the early 1980s sparked along-running miners’ strike and the devastation of NewCumnock. “Iwatched my dad lose the business and Isuppose my journeyactually started in 1984 when Istarted selling ‘weHavearicH, long Historyin shoes from the back of avan. It then goes to 1998, when enterprise... tHescots invented Ihad built the business and sold it for agreatdeal of money—and Iwas still only 37.” tHemodernworld’ Adangerous age, Isuggest,tocomeintovastwealth. “Could be,”heshrugs. “But thankfully my wife made sure was nine, went to America and became the world’s Iwasn’t...”, he says, leaving the sentence hanging. There richestman,” Sir Tomsays. He rejects suggestions that were some splurges, though, including indulging his love he might be seen amodern-dayCarnegie, but holds the of cars. “A Ferrari, Bentleys…” philanthropistupasamuch-needed role model. But ultimately,hemade adecision to focus on Theproblem, he explains, is thatScotland has philanthropy.Informed by his childhood in East fallen into aculture of dependency. “Dependencyon Ayrshire, Sir Tomquoteshis father,which he does nationalised industries likedeepcoalmining, steel frequently throughout the interview. making and ship building,”hesays. “Healways said to me, ‘Look son, this is acommunity “Someone else takes care of you. Well,guess what? where we makeour living, so we have to put something There are no more deep mines in Britain letalone in back into it.’” Scotland. [There is little remaining] steel making and Scotland, therefore, is amain focus of his attempts ship building, so these big, government-owned industries to foster links between eradicating poverty,boosting have almostdisappeared.” education and creating more entrepreneurs. Scotland was not always likethis, he continues, nor Hisphilosophyisinformed by AndrewCarnegie, the does it have to be in the future. “Wehaveaveryrich, Scottish-American industrialistbestknown for funding long historyinenterprise. Look at the Enlightenment thousands of libraries around the world. [an intellectual movement in Scotland during the 18th “The amassing of wealth is one of the worstspecies century]; the Scots invented the modern world. But of idolatry,”Carnegie wrote in 1868. “Noidol is more when we look at this, [we can see] thatScotland has debasing than the worship of money!” some prettyhorrendous child poverty figures, and that “A Scotsman who left Scotland in poverty when he we are not verygood at starting businesses.”

14 |ft.com/wealth bill askedHim if He Had ever been to africa?‘He saidcomewitHme. we did seven countries in sixdays’

2.

3. ir Tomcuts an incongruous figure. When he talks of his childhood or his father,itisclear both inform decisions made today. Yetheseems very smuch at ease in his vast apartment overlooking the River Thames at Battersea. Designed by Foster &Partners, from the outside the building resembles nothing more than alight industrial estate. Inside, though, it is all about the view: abank of windows revealing an expanse of river thatonlythe truly wealthyeverget to see. Yethesits in his socks in an easy chair,out of place in aflat which, despite its unprepossessing exterior,is suitably sumptuous inside. He reminds me alittle of Martin Crane, father of Frasier in the popular US sitcom, who, when forced to move into his son’s swish Seattle apartment, is adamant thathis comfychair must come too. Sir Tom wants to ensure thathis three children also remain grounded. Alongside his pledgetogive away £1bn, was another not to leave them his fortune. “Weweren’t going to leave them penniless,”hesays, “and we were going to supportthem in whattheywanted to do. But theyhad to have their own sense of purpose and achievement. I’ve justseen too manykids of rich people go wrong,”headds. Throughout our conversation, Sir Tomhas been pretty 1. Jobs offer the bestway out of poverty —and the best responsive to mostofmyquestions, but bristles slightly acoffee plantation in waytoensure people getgood jobs is through education. when Iprobe the career choices of his twosons aged 25 malawi that is run with “Wefirmly believe thatthe bestsocial policyever and 21 and adaughter who is 22. the aid of the clinton Hunterdevelopment invented is ajob,”hesays. “Simple as that.” Both his sons are musicians and his daughter works in initiative Hisother focus is on Africa and was born from sitting asocial media company, creative jobs thatmight be seen 2. next to Bill Clinton, theformer US president, at aG8 by others as possible, if you have dad to fall back on. Bill clinton, former uS dinner in Gleneagles. “These are decisions theyhavemadeand they will fall president, andSir Tom “Asone does,”helaughs. and rise on their own decisions,”hesaysfirmly.Quite Hunter 3. Theformer US president asked him if he had ever how much he is going to leave them is “still aworkin actorGeorge clooney been to Africa. “I said no,”saysSir Tom, “and he said, progress”. with staff at the Social ‘Come with me’. Whatanoffer.Wedid seven countries in But this is keytoSir Tom’scareer as an entrepreneur. Bitesandwich shop in six days; the whole thing blewmymind.” In the UK we are still too afraid of failing, he believes. edinburgh Scotland, which has been It also informed his style of giving. In between the We should look to the US for lessons on how to deal helped by The Hunter motorcades and presidential palaces, Sir Tomwas taking with failure and, much more importantly,how to pick foundation notes, the archetypal “fly on the wall”,asheputs it. ourselves up and startagain. On returning to the UK,arepresentative from the “People think, goodness, that’spersonally terrible if Clinton Foundation attempted to tap him for some cash. you fail and thatour peers look down on us, but that’s eS Perhaps bravely,Sir Tomsaidno. rubbish. Whatweteach is thatifyou’re going to fail, fail aG

im “‘But I’ll tell you whatIdowanttodo, which is to fastand fail quick —fail cheap —and learn and geton. I

Ty look at adevelopment initiative to help people help find Ijudgepeople on how theydeal with failure rather eT themselves out of poverty’—and that’swhen we came than how theydeal with success. :G

To up with the ClintonHunter Development Initiative, “Definitely,” he adds, leaning back in his chair. working in Rwanda and Malawi.” “Definitely.” PHo

ft.com/wealth|15

BLANKCANVAS Post-earthQUaKe christchUrchis BUZZiNgWith eNtrePreNeUrs

BY JAMIESMYTH IN CHRISTCHURCH

am Hooper dodged falling roof tiles and masonryasheescaped from an office block during the devastating earthquakethat struck Christchurch, NewZealand, alittlemore than five years ago. “The rumble of the quakesounded likeahugetruck hurtling towards me,”saysthe 30-year-old entrepreneur. “When Iran into the streetIsaw the church opposite collapse in apile of rubble. There were three people inside.” 1. Afew months after the February22earthquake, which the clear-up process claimed 185 lives, Hooper left Christchurch to live in continuesfiveyears Auckland, thinking he would never return to acitywhere afterchristchurch wasrocked by painful memories lingered amid scores of derelictand adevastating crumbling buildings. earthquake But within three years he had returned to setupa 2. restaurant called PotSticker Dumpling Bar,joining a Sam hooper escaped newgeneration of entrepreneurs who are helping to the devastation and within three yearsset regenerateacityinthe middle of aNZ$40bn ($27bn) up his ownrestaurant rebuilding programme. in the city

18 |ft.com/wealth 2.

“Christchurch is ablank canvas,”saysHooper,who recently opened asecond restaurant and has plans for a third. “There isn’t as much competition as in Auckland, rents are cheaper and there are alot of experienced people willing to mentor young entrepreneurs likemyself to help improve their city.” Newrestaurants, bars and other entertainment venues are badly needed in Christchurch’s central business districtwhere rebuilding work has been slower than manylocals had hoped and which remains largely deserted after dark. Bureaucratic delays to signature projects, such as anew convention centre and the citycathedral, coupled with long waits for insurance payouts for some residential homeowners, have created asense of frustration among the city’s370,000 inhabitants. “The scale of the rebuild is enormous,”saysPeter Townsend, chiefexecutive of CanterburyEmployers’ Chambers of Commerce (CECC). “Realistically,there was no waywe’d ever havebeen finished within five years. I’d sayweare now about halfwaythrough the rebuild and have spent NZ$13bn-NZ$14bn.” About 1,100 commercial buildings have been pulled down or are awaiting demolition in Christchurch’s central business area following the February2011 earthquakeand an earlier quakeonSeptember 2010. About 6,000 businesses were forced to move to newpremises, 10,000 homes were destroyed and a further 25,000 homes faced repair bills of more than NZ$100,000, according to the CECC. But amid all the rubble and dust, which sweeps across the town centre on windy days, there are signs of entrepreneurial activitytaking root, in partdriven by necessityinthe aftermath of the earthquake. Fashion retailers have squeezed into shipping containers, pop-up shops have colonised recently cleared sites, and streetart and sculptures provide asplash of colour to acitydominated by scaffolding and building sites. Businesses forced to leave the citycentre after richards the earthquakes are slowly beginning to creep back. ve da s; ge

ma ‘disasters alWays yi attractpeople

s: gett WhoWant to Give to 1.

Pho thinGs aGo’

ft.com/wealth|19 ‘the demolition process is very sadbut it creates opportunities.for entrepreneurs’

“Inthose early days after the earthquakeitwas chaos. We had 40 staffwith no equipment or place to work from and lots of orders to fulfil,”saysHenryLane, president of business development at Cerebral Fix, avideo games developer with clients thatinclude Disney, Dreamworks and Sony. Cerebral Fix was based in Christchurch’s central business district, which was largely cordoned offasan 1. exclusion zone for twoyears after the earthquake. Like manyother companies, the games developer scrambled to find alternative accommodation and ended up in a shed near the airportwith several other companies. 2. 3. Conditions were cramped in the co-working space but it quickly became a“buzzing hive of collaboration” as employees working for these companies in exile forged personal networks and swapped ideas, according to Lane. This experience sowed the seeds of Epic, Christchurch’sEnterprise PrecinctInnovation Centre, a collaborative work space based in the business district thathouses 25 technologycompanies. Thetwo-storey campus building is based on designs provided free of chargebyGoogle. Cisco Systems installed the telecoms networks and some funding was provided by the government. 1. “Ithas become the beating heartofChristchurch’s henryLane is innovation sector and helps us attractskilled staffto presidentofcerebral fix, avideo games come and work in the city,”saysLane. developer,seenhere EveryTuesday, MinistryofAwesome, asocial with itsceo,Benjamin enterprise, holds its lunchtime “coffee and jam” sessions dellaca at Epic for budding entrepreneurs, investors and people 2. seeking supportfor ideas or events theyare planning. construction continuesatthe “There wasn’t alot of supportfor entrepreneurs after re:startproject,an the earthquakes and yetthere was an outpouring of ideas innovativeshopping mobile phone giant Vodafone to choose Christchurch as people began thinking about how theycould help area in the centreof as the location for its sixth global “xone” start-up their cityrecover,” says Lauren Merritt, who styles herself christchurch accelerator and innovation lab. 3. as “chiefawesome officer”. “So we began these grassroots roberthenderson, TheVodafone xone centre, which is expected to events to connectpeople together and provide aplatform founder of cycle open shortly,will be located next to Greenhouse, a for people to share their ideas.” solutions government-funded incubator for early-stagecompanies RobertHenderson, who was among 60 participants at 4. thatprovides entrepreneurs with low rent, advice and the 161st“coffee and jam” in May, says he chose to stay Nicola valentine, support. “There are massive highs and lows when you co-founder of in Christchurch after the earthquakebecause he felt it PropertyPlot are astart-up and it is greattohavepeople in the same would be exciting to be partofthe spirit of regeneration. 5. position to talk to and swap ideas with,”saysNicola He initially thought of setting up abicycle share enterprise Precinct Valentine, co-founder of PropertyPlot, acompanythat scheme for students to help them getaround in the wake innovation centre in is developing software products to help buyers and ; christchurch es of events.Henderson later expanded the idea to cover 6. investors managetheir property portfolios. ag the citycentre and founded Cycle Solutions. Pensolve’smaxim PropertyPlot was one of the firstcompanies in the im He raised NZ$50,000 via crowdfunding and secured millen responded Greenhouse incubator to raise first-round funding ty et sponsorship from Spark, atelecoms company, for a to the earthquake of NZ$225,000, says Valentine, who returned from /g by developing projectthatisproviding asustainable public transport Australia to Christchurch following the earthquakes to afP

technology to help s; option in the city. be close to her family.“Ireckonthe earthquakes have

engineers rd “The demolition process is verysad but it also made Christchurch more entrepreneurial —itwas quite

creates opportunities. Christchurch is ablank slate for aconservative citybefore,”she says. richa entrepreneurs,”saysHenderson. “Wecan use the bike Another Greenhouse tenant, MaximMillen, ve share as away to revitalise the centre of Christchurch.” founder of Pensolve, responded to the disaster by da s:

Thesuccess of Epic has spurred local authorities developing technologytohelp engineers working in to to create an innovation precinct, which has attracted earthquake-prone regions to quickly find calculation Pho

20 |ft.com/wealth 6.

5.

errors and understand design decisions in engineering spreadsheets. Millen says some people at his university moved away to other colleges following the earthquake. “For me, as astructural engineer,itwas the most interesting place in the world to be,”hesays. Afactor thatbodes well for the city’slong-term recoveryand the supportofentrepreneurial activityis the high rateofinsurance cover in Christchurch. More than 90 per cent of homes and commercial buildings had comprehensive cover.This compares with rates of 19 per cent in Kobe, Japan and alittle more than 30 per cent in California —other earthquake-riven regions. Justin Murray,who founded Murray &Coinvestment bank in Christchurch in 2004 after adecade working in London, says asignificant proportion of the money recouped from insurance payouts is being funnelled back into the city. “Privatesector developers have gotonwith the job and are building newoffices on spec,”hesays. CanterburyDevelopment Corporation estimates there was 446,000 sqmofoffice space in the central business districtprior to the earthquakes, which fell to alow of 104,000 sq mby2013. It is now back at 215,000 sq m with afurther 80,000 to be completed later this year. Thenew office buildings are significantly more efficient and ahigher grade of development than the previous generation of offices, which means theycan hold significantly more employees and are aimed at 4. high-end clients. “Christchurch will need agrowth engine to attract more people from NewZealand and from abroad to fill Christchurch: Mind the Gap office supply in the city,”saysMurray. What do youdoifalmost 80 per “our ideawas to turn these greening the rubble,a In the aftermath of the earthquakes, local authorities centofthe buildings in the heart fallowplacesintopublic places charitable trust,has createda estimate about 13,500 residents left the city. But they of your city areflattened or made and inspireaconversation network of temporarypublic have been replaced by almost8,000 foreign workers and uninhabitable overnight? about the city,” says reynolds, parksand gardens on the site about 6,500 workers coming from other parts of New ryan reynolds and twofriends anamerican who teachesat of demolished buildings.scape in christchurch came up with a christchurch’s University of public arthas continued to erect Zealand. novelanswerand began filling canterbury. contemporarypublicart works Christchurch citycouncil is now lobbying central vacantsites with innovative the ideaforeshadowedawave acrossthe city. government toallow them to pilot a“talent visa” to bring community projects, events and of social entrepreneurial projects and while most of the ideas in workers with special skills from abroad. It is also installations. in the city’s post-earthquakeera aretemporary, some aregaining their “gap filler”project has that arehelping citizens through alifeoftheir own. focusing on harnessing the outburstofentrepreneurial installed dance floors, pop-up adifficult and lengthyrebuilding gap filler’s dance-o-mat —an energyinthe citytodrive its development. “Disasters shops,crazy golf coursesand process.everyone from graffiti open air dance floor with aglitter always attractpeople who want to give things ago,”says other temporaryprojectsamid artiststogardenershavebecome ball, lights andspeakersthat Dalziel, Christchurch’s mayor.“People are in astate of the rubble and empty spacesthat involved in projects, which can be turned on by depositing flux and all these young people are doing innovative, continue to blightNew Zealand’s have addedwelcome splashes NZ$2inacoin-operated washing second city fiveyears afterthe of colour to acity that was machine —has provedsuch ahit creative stuffand are willing to trythings theywouldn’t earthquake. ripped apart. it is spreading to other towns. have done before.”

ft.com/wealth|21 art forall collectors whowant the public to enjoy theirtreasures

BY DalYaalBerge

ostcollectors keep their hoards hidden in their homes, in bank vaults or in storage. NotChristian Levett,aBritish investment manager,who wants only to share his spectacular collection of artand antiquities with the public. The46-year-old philanthropisthas a“compulsive need to collect”,he says, but not to hoard. He wants the public to see his Greek and Roman sculptures, his Egyptian antiquities and his ancient armour —one of the l world’s largestprivateholdings. He also wants them to enjoy his artby Rubens and Picasso, as well as contemporaryartists. ede “The collecting frenzy gottothe point where Iwas putting things into insi ne

storage,”hesays. “I thought thatwas agreatshame.” vo

Most of his purchases now go straight into the Mougins Museum of as Classical Art, which he built five years agointhe hills above Cannes in the south of France. It is filled with more than 700 exhibits spanning ndre :a 5,000 years, acollection worthyofinternational museums, which regularly borrow from him for their own displays. oto ph

22 |ft.com/wealth christian levett satisfiedhis “need to collect” by creating the mougins museum of classical artinfrance ft.com/wealth|23 3.

2.

Other fund managers who displaytheir art:

andrew Hall: loaned morethan 100 paintings, sculptures and drawings by andy warhol to a2016 spring exhibition at the ahouse in Mougins, amedievalvillage, where he also ashmolean museum in oxford.theywerefroma owns tworestaurants, including La Place de Mougins, collection boasting some frequented by Picasso under aprevious management. 5,000 worksbyseveral Historyand collecting have been passions since 1. hundredartists.Infebruary, childhood. Levett’s parents regularly took him to castles in aBBc interviewabout why and cathedrals and he caught the “collecting mania” he startedcollecting, British- Recent loans arranged include an important Thracian bornhall said: “I turned 50 aged seven through Victorian coins, which cost“almost gladiator helmet, which the Metropolitan Museum in and then 9/11 happened and nothing”ofhis pocket money, he recalls. He has never NewYork wishes to borrow next year,and he rattles suddenly Ithought, there forgotten the boyhood excitement of “touching items, offnumerous other loans made in the pasttwo years has to be moretolifethan which seemed to bring the historybehind them to life”. just trying to build up one’s alone. They include loans to Germanyofa2nd-century bank account.”the hall art As ayoung adult, his interestinhistorywas rekindled Roman cavalryhelmetfor the Braunschweigisches foundation, founded in 2007, with visits to museums and galleries, including the Landesmuseum and a1st-centurybronze head of makes available post-war and Louvre in Paris and the British Museum in London. He Augustus for the Romano-Germanic museum in contemporaryart worksfrom bought 18th- and 19th-centuryfurnitureand Georgian Cologne. Among his contemporaryworks, Ai Weiwei’s its owncollection and that of and Victorian hand-painted natural historybooks, hall and his wifechristine “for monumental Iron Tree is on loan to the Yorkshire the enjoyment and education and recalls his excitement at discovering thathecould Sculpture Park. of the public”. actually buy Roman and Greek antiquities. He had long Thecollection has been built with an eyefor quality. assumed thattheywere only in museums and he was Itsjewels include acolossal Roman depiction of the Stevena.Cohen: one of astonished thatthe prices paled againstthose for the the world’stop collectorsof Emperor Hadrian, which shows offthe extraordinary Impressionist and modern Impressionists or contemporaryart. skills of its 2nd-centurymaker.The 216cm high marble art, he is agenerous lender to Realising thatthese pieces needed to be looked statue has draperythatflows likerealmaterial over his institutions and exhibitions. after and kept in proper conditions, he hired Mark left arm, revealing his fine muscular torso. last year,the billionairewas Merrony, an academic and archaeologist, with whom he The“Crowe Hall” Roman urn of the 1stcenturyis revealed as the secret buyer established the museum. They converted apost-medieval of alberto Giacometti’s among other treasures. Despite its exquisite carving, it l’homme au doigt (1947) four-storeybuilding once owned by Sistercian monks had been adapted for use as alamp in the 1970s. But its for$141.3matchristie’s, into a550 sq mmuseum in Mougins. importance was recognised when it sold for £445,250 which became the most Thesite could not be more appropriate. It is close at Christie’s London in 2011 —more than 40 times its expensivesculptureever to the Graeco-Roman settlements of Nice (Nikaia), sold at auction. his collection estimated price. It had come from Crowe Hall, one of the is said to include Vincent Cimiez (Cemenelum) and Antibes (Antipolis), but it finestRegencyvillas near Bath. Levett bought it from a vanGogh’s Peasant woman also reconnects its ancient pastwith the modern art European dealer who acquired it at auction. against aBackground of produced by more recent former residents. Levett,asoftly spoken man, prefers people to focus wheat (1890) and Paul Picasso spent the last12years of his life in Mougins. attention on the collection rather than the collector.He Gauguin’s Bathers(1902). Fernand Léger,Jean Cocteau, Francis Picabia and Man is an Essexbookmaker’s son who made his fortune from Kenneth griffin: abillionaire Rayalso lived there, and Marc Chagall, Raoul Dufy, hedgefundmanagement during the mid-1990s. hedge fund manager said to Henri Matisse and Amedeo Modigliani were nearby.All Other wealthyindividuals splash out on fastcars and have an insatiable appetite are represented in Levett’s collection, alongside master boats, but he is divorced with twochildren who drives a forhistoricand expensive sculptors of the ancient world. art. his purchasesreportedly Mini and spends moneyonart and antiquities. He has include $80m paid forJasper Hisitems reflectthe classical world’s influence on Johns’s falseStart and$50m later artists, from Rubens (the 17th-centuryFlemish paid forJackson Pollock’s master’s portraits of Roman emperors, for example) to thecollectionhas Number 17a. his loans to contemporaryones such as Sir AntonyGormley(the public exhibitions include British sculptor’s twocast-iron male figures suggesting been builtwithaneye the artInstitute of chicago, to which he has also made the Greek myth of Narcissus). forquality. multimillion-dollar donations. Ancient, modern and contemporaryexhibits thatone

24 |ft.com/wealth ancient, modern and contemporary exhibits work well togetherto create dramatic displays

might not think would work comfortably together create dramatic displays: aRoman Venus is next to Salvador Dalí’s eccentric SurrealistVenus de Milo with agiraffe neck;and the Blue Venus castbyYves Kleinisnextto TheBirth of Venus by Andy Warhol. There are also Roman depictions of the goddess of love and aCézanne drawing of the Venus de Milo. At last year’s Masterpiece, the prestigious annual art fair in London, hebought avase by Grayson Perry, the Turner prize-winning potter.Hewas drawnimmediately to its design with the word “Antiquity” written across its front and he has placed it alongside 4th-centuryBC ancient Greek vases. Levett speaks about each piece with scholarly knowledgeand puts emphasis on the importance of a pre-1970s provenance. He notes, for example, thathe bought the Thracian gladiator helmetfrom aFrench medieval arms dealer and thatithad been soldat Christie’s in 1933, having been found in Italy in the 19th century. “If you can’t provide provenance on a... piece, it reduces the value to almostnothing,”hesays. “[Then] it comes down to the overall qualityand workmanship incorporated in the piece and its natural beauty.” Although he keeps adding to the collection, the pace has slowed as prices for antiquities have risen dramatically.Hebought an Egyptian sarcophagus for $1.2m about seven years agoand adealer recently offered him “five times whatIpaid for it”. “I’mnot buying in the quantities thatIwas years ago,” he says. “Financially,it’snot really possible anymore when things are trading at £7minstead of £500,000.” Does he keep certain artefacts for himself?“Notreally,” he says. “Mostofthe beststuffisinthe museum.” Although he spends about twomonths of the year in France, he is based in Britain. He works as aportfolio manager at Moore Capital, one of the longest-standing 4. hedgefunds. While talking to FT Wealth, he keeps an eyeonthe crude oil and gasoline markets, apologising beforehand thathemay need to break offtotrade. 1. He misses his collection when he is away from it: “I 5. bronze phrygian-style don’t see it as much as I’dlike.”Initially,hedid consider cavalryhelmet, 2nd- 3rdcentury ad opening the museum in London, but he did not have the 2. confidence. Marble statue of “I was overly paranoid about whatother museums emperor hadrian’s would sayabout it and generally the academic approach head and abaroque s to antiquitycollecting. In fact, Igot thatcompletely body,17th century ter wrong because other museums have been unbelievably 3.

/reu supportive and the academic world has embraced it as ai weiwei’sirontree well,”hesays. 4. ddis collector christian ro Themuseum now attracts about 18,000 visitors ayear, levett an impressive number for atinyvillage. 5. igel “When Iopened it, Ireally had no idea whether it roman ornamental :n would be tens of thousands or twomen and adog on a cineraryurn, 1st oto summer’s day,”headds. century ad ph

ft.com/wealth|25 ac at touris as shoppers, cu entirely toile by sa Lo shoppers Boboutic undiscovered 26 BY than no ch se ys Mi Th queline st Galeries urprise uboutin, friends Na omers |F ts she e2 Ha ts cr ea omi t. 8-year-old in wl iBao jos on de ts co want and via La to and on veloped tling to La top-end but ms an M/ Ro does es her cookies” fa br Sweden the et rela to yone its ye al we ands, to ells vN oo website buy idea tt st tives main ge Ch ak al ei es br ock wes ic who ti ’s inese-born nP abroad such ands. tH een tr of back k nto og Acne to tern Mo foc discovering aris has kf Mi sense bring the as ho us schino from Ha fashions Studios, is ea seen af It is Lo ter tha alian iBao. o of “e niche or Danish Europe, uis ver the and ts wha years PPe su Vu he knit ne Wha ything to whose throngs and tC Ch wd it does Ch of citizen, wear ton mo hinese is ris tm rela inese being es selling re from tian brightly rs sec not i ay gners. group of tively tion come who foc Ch hassled re her s inese us as

Photo:mihaibao br of itself MiHaiB Fa ands shion disco on ao ve we the sells ring bsit ide ne e a w Ft.coM/wealtH | 27 five years ago, selling thechinese labels they hadnot heardofwould have been unthinkable

coloured, androgynous pieces sell for less than £1,000. MiHaiBao, aname which translates as “secret, overseas treasure” promises on its website thatcustomers will “hit on something new”. Yetjustfive years ago, selling Chinese customers labels theyhad never heard of would have been unthinkable. Lamhas tapped into atrend that could really shake up how the providers of luxuryexperiences, from handbag retailers to hoteliers, cater to ultra-wealthy Chinese. This market used to be about conformityand easily recognisable displays of wealth. Now, however, the richestChinese consumers do not want to show they have money, but thattheyhavegood taste and thatthey are individuals. They are becoming much harder to sell to. “Inthe 1990s in Hong Kong, you would sell to rich mainland Chinese shoppers wearing designer sunglasses with the price tag dangling offthe side,”saysSunny Wong, aveteran Hong Kong-based retailer who until 2014 ranoutlets inmainland China for brands including Gieves &Hawkes, Kent &Curwen and Cerruti 1881. “Whattheywanted to buy was the label and [what] they wanted to show was thattheycould afford the price.” Wong explains thatthe small proportion of Chinese with the moneytoshop in Europe really want to show their friends back home thattheyhad been to Paris, London or Milan. Thebestway to do so is to bring back an item of obviously high qualitythatisdefinitely not available in the luxurymalls of Beijing and Shanghai, which are now stuffed to the gills with Dior,Chanel and Burberry. They “search online to find out about boutiques before theytravel”,Wong explains. “On [London’s]Bond Street the shops are veryfamiliar.Itisnot anything newfor them anymore; and theylikeEuropean department stores for the labels theycan discover there,”hesays. In an intelligent takeonthis theme, through MiHaiBao, Lamisalso offering those Chinese who cannot travel the chance to feel they, too, have visited aEuropean boutique. “The middle class consumers can buy from us and theyalso gettodiscover anew European brand,”she explains. Federica Levato, aMilan-based partner at consultancy Bain &Co, has seen the same trend. She says thatwhile 1. much of Chinese shopping in Europe is price driven because of China’shigh taxes on luxurygoods, “what we have seen in Europe in perhaps the last18months were inculcated with notions of conformity, Chinese is this rapid growth of the sophistication of the Chinese millennials makemore self-focused decisions. customer in Europe”.These shoppers are looking, she TheBain reportnotes that while middle-aged explains, “for the less showy and more sophisticated Chinese tourists still often travel in largetour groups items, with an intrinsic value, not only anice logo”.They –often wearing matching caps and trailing after a want “a unique and personal buying experience”. guide –the nation’s under-30s are more likely to travel Politics, as well as culture, also plays apart. independently. Bain&Co’smostrecent reportonChinese luxury Fashion tastes are changing for political reasons, spending identifies a“growing individualism[thathas] too. Since he became president in 2012, Xi Jinping has continued the trend toward fashion and exclusivity; cracked down on corruption in business and politics, smaller,fashion-orientated brands are still gaining creating aculture in which ostentatious displays of popularity”.While their parents and grandparents wealth are frowned upon. Wearing obviously expensive

28 |Ft.coM/wealtH 3.

clothes is too riskynowadays for manyofChina’ssuper- rich. According to arecent reportbyGoldman Sachs, the countryisbecoming home to “a more austere, individual and lifestyle-conscious consumer”. Thereportadded: “A far more pertinent issue for manyofthe largeestablished luxurybrands is how to stay relevant in today’sconsumer environment.” China’schanging tastes have been felt closer to home. Hong Kong used to be the favourite shopping destination for mainland luxurybuyers, thanks to the territoryofferinglower prices than in the restofChina, which has adazzling array of importtaxes.InMarch, however,retail sales in Hong Kong fell, on ayear-on-year basis, for the 13th consecutive month. Analysts saythis has something to do with Hong Kong’s commercial landlords having chased the high-end brands as tenants. Theterritory’stop shopping streets are dominated by the likes of Prada, Gucci, Chanel, Louis Vuitton, Armani and Dior.But luxuryoutlets are now starting to close down. Chow TaiFook, aHong Kong jeweller thathas reported slower sales, said in Januarythatitwould close 2. between five and six stores. “Hong Kong has gradually come to be seen as a 1. ‘commoditised’destination and wealthyChinese now Jacqueline lam 4. favour edgier destinations in the region,”wrote HSBC promisescustomers analysts lastyear.Those who are not travelling to Europe something new 2. are visiting South Korea, which enjoys areputation in amodel presents a Asia “for up-and-coming trends”. creation forfashion “Wedonot see Hong Kong recovering,”saysBain’s house marni in milan Levato. “All the brands are over-exposed in terms of 3. retail surface in Hong Kong, with some having 10-20 irene kim wearsan acne studiosred coat stores, and keeping all these locations is becoming and aJimmychoo unsustainable.” bag in Paris In China, luxurybrands mayhavetomove 4.

ty downmarket,toattract those consumers who are still fashion studentJaime et lo wearsadressfrom fascinated with brands. Wong, who now runs aprivate /g koreaand an acne equityinvestment unit at Hong Kong sourcing giant Li afP studiosjacket r, &Fung, says: “Maybe asecretaryinShanghai cannot buy the handbag from Prada but she could save up for the sunglasses. This is areally exciting market.The ultra- sinclai

in rich? This is maybe acoupleofmillion people in China; st it is not abig growth market.” kir Themoneyhas moved elsewhere and the high-end s:

to brands need to follow.“Themiddle class is 200m-300m,” Wong says, “and it is growing hugely.” Pho

Ft.coM/wealtH|29

Photo:afP/getty images in Lo pr IN 34 p42 dark smok that Ch si op nd VES im de billo side er ney er on ev wo of st ea th TM ty ac we ut lt ks an he eh alth ma EN db ig rk T h- ey et en on of d d ana sho ga EN 40 vin TRE ws em ar ia an PR ms fi EN ir gh on tr Eu on t wi g RS ll in Us us ho Ph 44 ed wd Il dem aN to ol oc st Th la re rs ra RO ng ar cy e th Py en ove re Ro CO 50 fu ma RRE rp se ft nia ro to .C SP om pe ’s li ed ON /w dy rt ea yr na ow DE lt ig st h|33 n ht NT ie s s INVESTMENT |ENTREPRENEURS | PHILANTHROPY | CORRESPONDENT H oeet n plent and movements sensitivit appetite, global as can you and terminal data efrac sn ud otefuture. the to guide no is performance ma tha buyers potential neglec developers and agents estate funds, advertising companies somewha Yo as such cities, global mark housing for asse other plent have homes for other to warnings the of none with frequenc 2020. by cent per 20 buyers promising flats, wi circulating is player major mark their of k too not etgot n1 months.” 10 in growth cent growth. in increase per cent 46 “Fact: trumpet: to opts instead proximit the or retailers, fashion the or nightlife, the on focus might Shoreditch in 34 Bo some Similarly Th Tr Th hhnrd fnwybuilt newly of hundreds th kadDubai and rk aeor hare ar ygod aq ra an @J |f e tha ue, Pl at skn fmark of kind is ikbuck.. uick ew Xe udithRE sweetehigh-end the where is t. ed tH ty yt e otl about talk to een w swl su,o tha or up, as well as own aC co tu tc eieta development residential ac e finvestments. of pes luxur of performance the follow asse traded internationally a fledged, in fully reside to feel it does ow ,w tisn ra sF ass though lasses, suk saeaet are agents Estate nstuck. ytoL ommodit LI m/ et ig u tas comes also it But ding. er et iea advertisement an hile es ne es n npbi,btone but public, in ing va yL wealth ot —s —a ye or ns ondon ex ig no oe na on homes ondon tH ls W- est aecome have to eems tt et dtha nd VI to cl high- actly Ho yoft einc yt tc n may ing erinvestments heir ne ac ra lass? ytoc mo gKong, ng Fa ’s an BU ’t ra cker —s mo with ommon ptlgi of gain apital hs aspec these ehsee it scene, tech tofo ieinside live at ab ct li eslooking ders das tached NG urrency :20p Yo ttow uc Lo .T roc Lo ve Un il ney uc as has th hese ndon ndon hure ds like tp New er an er arn ast ’t ts plan on depends financing bank their Often themselves. finance developers how to down partly mark luxur of thousands are hs h att buy to want who those trouble. in are we then in pushchairs with around trekking homebuyers not in Guangzhou in brochures reading speculators dazzle to conceived If live. to places as than money for containers as more designed some since problem, the compound also proper the see needed. rental to adding ma investors these side, positive one. the old On their to on hanging while years proper buy to afford can who occupiers investors. to are year 10 this to cent up per by fall could segment this in prices predicting are analysts pipeline, high-end for tha given disingenuous, also n u ol rfri o obe to not it prefer would but in, vie backward-looking accur technically be merc fne of h fac the however can, term prices. the to added premium the of because homes constructed newly for loan-to-value lower offer lenders be should buyers resale the secondar onto trickling begin to need will esnbeinvestment. reasonable ncentral in IN Th It inabilit investors’ off-plan But Th yl cu ”s load otehaahsfor headaches the to adds also wfl ef s iigt u o h long the for buy to aiming ose yofm et et —n rnl aln.Wt esof tens With falling. rrently va ls hc almos which ales, tt t cso hr-emivsosis investors short-term on ocus y snotoriously is u hs ne those out at u setbihd though established, is lue ha ym tha JU tall ot Lo sr ark to ac tma ark dnde pert ea be to appear does ndon sn pin up ising Lo e man ver AN Cl ty et rannme f“off- of number ertain PR —n dnproperties ndon et pa,south apham, DI Th st the yn swings. .F aw c,wihi much is which ock, ,t eoetheir before ya r r fe are ere ew c:teproper the act: at ya tb comple be ot wp r tha are ak w, atet nthe in partments ,wt a with e, cy yy -b th ebyn can buying re ec oP ah roperties, ap clical. 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PHOTOS: BLOOMBERG ‘londonseemsa goodlong-term investment...over 15-20years’

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ft.com/wealth|35 INVESTMENT |entrepreneurs | philanthropy | correspondent H hedging es $3tn can book: you by since per inde in someone British recommend bunch spouse, these over commonly the —a contempla shor 10 group US ex year and multiple 36 wh be tima Apar Because, d) a) According c) b) Ha clusive the no the per hedg Ru nd cent claim ..?” sa |f ap x, tcomings “A “Nice “M tha “H ving wor the ev y? “N Ha ma T hedg tes “top ssell nother cent. of il Bloomberg tf ri sa t. ow ay sir?” en he tt ef an of either ta va La rom th, them. second mptons. co who tiris circles to eh —t ne ime. tu to Iv te car/ fund et ow tells number und Killers), is hold ything te clients’ 25” while 3000 ef sV No be ver according al na the ique m/ such to ale Pa tP he per an und their da to in claims it egas yacht/ ppe Ye for w, managing am you ja the nama But ie yd we manag tp moved et are response ed (apparently y, cope as quar formance tt mboree hedg t, sh shares to gi er at ap manag another ec hedging has mone ar on I. 94: be yt HFRI oc al the hotel-suite Ih tha down if ” av point all. Cook, ky spouse!” oser onundrums, to ter ge ia ts ar Iw at with ot th ng ef a es calc er th to ap fees om in ls ve ou be on hi y, this the appear .W un of ere omehow .O ers fea ei indus et funds coined Composite these 31 ar rc not out on ula writing $4. on 21s by real agains dm las ting charg ym sah ,ar to ng ha rs fu ty tured ar/ time to, ha per fu av ted rock mee had 7m, ty t-centur these uch ts gues soirées tr ve an os es ecent yacht/ —s er Iw might to edg ear cent hould y by ed nd tha ta t ag t ag of los ting risen be nd eh?” to be a a ould at t ome te la e e, ers t t4 te y sc he st al an pe mik pla the dg l la he Pa te uncomf que ya eL rC rt pith y, bout ans ei ook stions im at gh yp yd in 2. 1. we ele he ,m ’s or aw ut Abigail rs table vision - and ast in g yp do kw to er o wn a rd of ’s dg ve bY Ma ar st tt ef he wV me in un ce ty nt nt ds po op er s trythe response by satirist petercook on meeting someonewho claims to be writingabook:‘neitherami’

Unbelievable, but you had better 1. believe it. Even though hedgefunds have achieved only one-third of the return from asimple 60:40 equity:bond portfolio over the pastfive years, their managers have charged 36 times the fees, according to new research by wealth manager SCM Direct. No wonder the parties are good. 2. But with hedgefunds still accounting for 11 per cent of afamily office’s appear the height of bad manners. portfolio, according to US research However,inamonth when the firm PeltzInternational, is your wealth world’s 12th-richestmonarch manager being sufficiently rude over can question Chinese civilityata the crudités? Buckingham Palace garden party, Iain Tait, apartner in the private rarefied companyisnoprotection investment office at London &Capital, againstharsh reality. Even hedgefund sees no reason to spare hedgefunds’ managers’ peers have stopped being feelings. “The talent pool is worsening,” polite about them in public. he says. “This has led to often average In April, US activistinvestor sell-side analysts deciding thattheyare Dan Loeb described the previous going to break away and startahedge eight months as “one of the most fund of their own with often sub-par catastrophic periods of hedgefund strategies and poor results.” performance thatwecan remember”. Dimitris Paraskevas, managing He likened managers’ performance partner of Elias Paraskevas Attorneys is to the “firstinnings of awashout” more tersely damning. “Too many, too in which some strategies became “a similar,too mediocre,”hecalls them. hedgefund killing field”—mixing Combine this declining talent with his metaphors but hardly mincing his one-wayfee structures and Uwe words. Last month, former hedgefund Ketelsen, head of fund research at boss Steve Cohen told aconference how Coutts, finds little to like. he feared for the industry’sreputation: “Hedgefunds typically charge “I’mblownawaybythe lack of talent.” inflated management fees —a At the same time, billionaire investor guaranteed waytoerode returns,” Warren Buffett expressed confidence he says. in winning his $1m charitybet that “And these are combined with over 10 years an S&P 500 indextracker performance fees thatcannot be fund would outperform ahedgefund clawed back by investors in times portfolio after fees. of underperformance. These fee With ayear-and-a-half to go,his structures… makethe vast majorityof low-costtracker is 40 percentage hedgefunds unattractive for us.” points ahead —leading him to note, If your wealth manager is still not pointedly: “[Losing by 40 points] convinced, pass on this tip: the next

s maysound likeaterrible result for time ahedgefund manager introduces

ure the hedgefunds, but it’s not aterrible himself,think of those party bores

at result for the hedgefund managers… who claim to be writing anovel, fe If you have acouplepercentagepoints crowdfunding an art-house movie, or ex r sliced offeveryyear,thatisalot of having their Twitter feed turned into s:

to money... It’s acompensation scheme aTVshow… then repeatafter me: thatisunbelievable to me.” “Neither am I.” pHo

ft.com/wealth|37 INVESTMENT |ENTREPRENEURS | PHILANTHROPY | CORRESPONDENT E their par in young 8,1 Consultanc schools of the dispropor ra only chairman. Nicholas compe larg de 2,584 man In the parents 5p which are cu intellig organisa increasingly these by research 20 is hold forecas be tr interna over English-languag 38 aining. rely ex “T Despite Fo Th “T terna rric termined English-languag 10 16 78 In seen er tic lik world, Educa en |F pec yf he here rt is for en true. terna choices? to years’ cent from schools ular ulum in ely an has te heirs amilies umber he mone ence ts tional UK tional T. ted —t through umber 8. who qualit tion fr of nglish to already 2000 yh published on He Brummit by CO is to tiona 75 ”s ne tion anca the of tional school. been business, Ja become ys he to influence time, hug is and as be mb to to ay the an wly domina yn sa want non-English-speaking M/ tha torical nuar for school ay Schools, of grow ye ra In sK pre Collabor the ignore well ys —m tely fluent of educa is ed of oo WE char global y2 st in GO GO pidly and tp ei ins used schools’ terna School duca more tw tha not ev children fer So privileg y1c ha em their world t, bj the nterna 026, ei rovides the AL as in ev titutions an from in ice ted connec ting the . ec enrolment ti truly it tt wha tional nterna is only in an tion en the by ex tional Fe yp professional TH ompared Ru ins st nfluence an t, is than highes here their at children pa dt by according Consultanc English, consultanc ’s ag bruar but man more choice the arents also 4.16m ive ti th tional titutions increasingly ea on-profit wealth wealth and the nding enrolled he e, mark the nfluences tion consultanc tional were from 30 ”s School nd number for there on growth yo ti the world languag y2 ay so. riches years. n it LD LD is their are can of schools in with ft with et s to y, ra if 01 lingua and is It he is to tha not ng y’ 6 in y, se is of s t a e t t e y S per jumped eques larg commenta propor parents firs st ins overseas of significantly the of live tha independent learns amounts are become educa children girls this British go schools advisers doors the ser In Robinson, by or which the the ex the published grown UK’ of udents Th At “Over It Ho ample, dependent ld ST overseas th foreign about the titutions vice, tt tn va same well-known In problem Go sm cent ei overseas perception is et st ag ea Stonar we oc teps trian tion st on dependent ncreases hard represents andard Eng st od tion signifi otal ed os cu ly dvisers continue TA insis who ver omplain from vic the at -B sa in to in half tha SC of percentag tp tha lt Schools outnumbered. be st and is annual but tors lish yt ge r tims ,S facilities, ur 20 pupil board st tha 20 IN mone it to udents tics, there res pas tn School, AR tw ts in t2 might ha represent ner cantly he udents] schools is of Schools e. usan 10 16. 16. in tha quantif consider ti and tha hp een at ha tigious [in sa 30 ve 0p tf has the of bes Benenden al and per ts terms ive are popula to Schools yt ve yt 1,280 ts ew are HO VE ins census Guide, in upils tt their years. er secre Ha R F the .S ay 11 is at be. ea tB st total ha be oe ome ves known pointed he English cent the the tead. unfor years in cent sh uck, he immersed so and not Council. yh man mlyn, sl ti ritish schools BY propor seen nsure Th jus ted propor of whose ins the sending tar own as tion man ns as points propor overseas ow Of ha number repor an ”s in ST Council, borne EM er qualit 18, t5 of yo Educa ty tuna titutions, not an yo School, consider ome ve ten FO UK ay for OL as 2003 direc widespread boarding ec advisor towards .3 MA pupils speak sur success. yo ear their ft were tion ft sJ umber already tion ently has the parents tf chang per ,s tely its the out, he tion verseas yo he ve in out their BO ulie OR and tion rom ME hows tor of to yed, ers child f for from ce YD at able for y 70 of ed a of nt E FE RE NT ES E GOL TH SCH Sour Malv To Cheltenham Hur Queen Ac Fi Sour Institut College College Aiglon Institut Ac Fi Sour Middle La Ke The Salisbur Ac Fi HA wr nbridge ve ve ve nt ad ad ad tw La ce: ce: ce: ern ence School, emic emic emic moste ood most most most EB wr se College Eth auf Le The The The yS du A TH Col VE ence x, NG NG lpin Ac Ro elbur House ye ye ye Sch DS ch dem MA Le Go Go Go OOL lege La adem ar ar ar se CT oo ex ex ex man ville In od od od ool EST die y xpensiv 20 20 20 ga t EI l, Ro ’l pensiv pensiv pensiv Schoo Schoo Schoo BE CT 15- 15- 15- 's sC Be Scho y, senber TA Co MA RO au 16 16 16 ollege llege ls ls ls ol, ($)* ($)* ($)* Sole CO SA Guide Guide Guide g eU eSe S eU BR ND NJ il wis LI LI WN Ks Ss ITI RE ME ch chools sss scho AR oo ch SH SH SH ls oo SE SU DA ols VI l s 52 52 BO EN CT 53 CCE 56 ,0 56 ,0 58 58 ND 59 59 ,4 60 ,0 60 60 ,7 ,2 ,3 75 ,8 ,1 60 ,9 IM 40 A 30 50 70 A 46 30 R S S S S DI O S 86 TH 88 O NG ,0 ME ,0 00 F 50 102 99 E ,3 10 ,0 10 8, 80 45 0 PHOTO:ISTOCK interna tha independent because In has overpopula languag business. In Ha “T dependent tw not terna here mlyn ould tional been ee it are An tional does duca sa tion not ys umber quite pick schools. Schools st sur udents, tion the not with demand ed vive al problem represent is of up overseas ot Council al ”s advisers without by of ucr f he o schools the r at sa an of all ive st ys. simply English- sa udents y charging Advisers. managing f ap lik inter sys the som ees Among “T p e te y l e E were i h n m h c nglish schools ey a at av t for i ’r ional eb ons, s es uniform, those y direc boarding eg s ay t c em but l un charging boarders. a ing sses tor w is to 10 i it ”s t the of h notice ’ or s years school ay at f Educa o help mos sL ah re wo-tier xtr es ag at ig te with pupi h tion ot We wo as er xpensive he er - bb, r l tier visa s, at vices e with f fee o r st st st he s tuition Ethelburga’ f form £34, boarding admission the normal English the Ethelburga’ o t ude udents. udents udents r Ste mc sa cos dif 434 ys. ven a n ference hildren. n t to recei s educa d “A tuition .“ ” are receive for Ja ft school £ All lso and 42, sC sC his ndrell, v d far e the of tional o is d 47 ol ol FT is m enrolment in more b our le le due in af 1f es re .C yi ex gi addition ge principal ull B tic or flec pe OM nterna at progr interna , ritain, t o t e, overseas than nses progr boarders h ted t /W a h ex t ea amme asks of p tional in EA in for to Q tional l amme dditional a of overseas volved the u i LT their n e UK Que sixth for st e at H|39 and n fees, ha sixth of e in n t ” INVESTMENT | entrepreneurs |phIlaNThropy|corrESpoNdENT F rat lump mor motor this similar boiled cook blood pots on ma produc problems worldwide Fish, Guelph, science larg 20 He intak will five per par enough which of Cambodia. as alterna scientis Ch profit 40 to th ten Ga Th Ch Anaemia, It mallish 11, ea ris alth pre ya tic th cent ely are talit be year all |f aN ed ma vin ec arles’ eb topher the nd compared caused of lso ularly while par vious people de ef soup lo tive tivit able cooks began Organisa tw bene org a-half af the entrepreneur with ondition from t. anaemic, yl ox yc yi iron. is Arms of at an earned velopment, compan be fec ame co from sr ea yg np ho piece be on et for y, children to scourg to increased ev doing ok associa st ac is ac ts fits c esearch en Ch ap tt by according m/ Canada’ ’s vincing iron with ht in regnant iron ters. udies with people trong, er is increase ute the more ing blood ondition harming arles, through hs iece in iron we he 2008 of yd with his tion can yh according eo pills. in same tha it. aluminium supplements ac co He iron. li research me ted ay al tha PhD under of ef than Ir sought a2 de Cambodia: fa to cause sU research them worldwide does ,i ountr aC 42.6 hopes tL risk ke hap women. e tal belie th iron ound with tm tf ficienc people naemia xplored fa As to 9-year-old year And tha the niversit uck anadian cognitive ns in ound tigue and ab the of not per ay ocial the ar yt to ved when ti biomedical to al to ed to body yI low by . oN illion-and- ma mak provide ha s ang cook yi improve ’s ew WHO pots. for carr cent Wo alle ag build ron id in and iron if tha an iron t yo in ternal n bir with 55 ,i eo people eo oc ea the 20 rld via and er y s t who f with th low f .I 12, f y te as a t ed al ch against holding childr Fi lu helping sp cl sh en ingot os en 1a ir ck ec the on in in nd lu st ca lu deficienc the 2. hat en mbodia cky ie y figh tr ar Ir s ad e on t ck y ep bY 1. Ad yc Am re So SA mS har ne on ur cI m s al bo oS T Howwegot started lucky Iron fish has found success in its dual bottomlines: looking to earn profits while also working on the global fight against anaemia. founder Gavin armstrong has garnered c$1.6min grants to help scale the group.among the organisations he gained funding from, were Grand challenges 2. canada, backed by thecanadian government; Guelph Innovation; the university of Guelph, wherearmstrong thecompany is afor-profit Thebusiness model taps into a completed his phD growing trend of groups thatseek thesis on the lucky with amission that focuses to generateprofits and also produce Iron fish project; and the saving lives at more on social good asocial impact: it generated C$1m Birth, an initiative ($760,000) in sales lastyear, that is funded in part Armstrong said, selling 70,000 fish. by theBill &melinda Thefish shape was chosen to look Itsmain direct-to-consumer market so Gates foundation. lucky Iron fish also likealocal species of fish thatis far has been the US,where customers received c$270,000 “considered luckyinvillagefolklore”. pay$25 to buy afish and at the same in equity investment Thestudy,which specifically time donate one to afamilyinthe from twoimpact surveyed women, found thatanaemia developing world. investors, who was indeed reduced over acourse of It is backed by agroup of investors look forfinancial returns alongside three months compared with acontrol and also funds itself through grants. social benefits, says group. However,the benefits ebbed Armstrong said he went with a armstrong. after six months, perhaps because for-profit model after working at non- the funds were the women shifted to awater source profit companies that“did absolutely used to payfor various start-up costs with higher levels of asubstance that incredible work… (but) don’t seem such as launching its prevents iron from being absorbed sustainable and nimble enough to website, as well as properly. adapt and grow”. research and hiring Theironfish was also more LuckyIron Fish utilises a staff.the group affordable, costing $1.50 and, foundryinCambodia to produce recorded c$1m in saleslast year that it according to LuckyIron Fish, lasts up the fish it provides to thatmarket, reinvestedintothe to five years, compared with $2.50 a something Armstrong hopes will company. month for iron pills, the study found. give an additional boosttothe local armstrong said Armstrong has turned the research community. aprogramme in which consumersin into acompanythatseeks to alleviate NowArmstrong hopes to hook more developed countries anaemia, which the WHO data show consumers in the developed world onto can buy one fish affects 1.6bn people worldwide. It sells the fish by working to makeitavailable and donateanother the fish to individuals in developed at leading retailers. Hissights are set to someone in the countries and to aid organisations in high, with hopes thatthe little fish developing world hasprovedan the developing world thatcurrently could “improve potentially billions of unexpected boon. provide iron pills. people’s lives”.

ft.com/wealth|41 INVESTMENT | ENTrEprENEurS | philanthropy | corrESpoNdENT bes the in coined such order Last.T in ap yacht, no critique economis it then earned mos “merchants” (the insights: possession out, rich va locks in as are for merchants de from read, illth Gandhi, ev of the useless ex produc “W 42 also Jo Wha Ru While But asion pand. liant va social 1860, as as pools ol social tk the economically dark back tf |f hn are people, “common st did lu dis skin at ingle tream Ge and of nown of amous illth at al covers ting ”, ti he ts. na the through T. finance erm Ru tributed adds their “no org of ion Mo not arms of and to which welfare Ru andscape-de side sn of “T purpose, cO ts tion de influenced Global book skin, volume the word dead itself ”. of should Pr fac misselling eB here skin eeded ne such .I to more and th already: the fines ca Un m/ illth to sa of of own ous ”, the tc for ym tor tch ac man ernard wealth were illth is vings is ’s we illth. lik the an wealth. grea produc wa ontains trouble” has is crea in to tions as ta growth y, st va ar illth, wealth as essa an wealth ade is on. st yo use ew or called no ya agnant, the ter ad go AL nd Adam luable Vic causes rong ogue the tV aw continued la at tes “illth man to can broad uncomfor ealth Self-enrichment, acc spent fR facing ”) od ys wealth ea sa from Sha TH of of rugs to ter and tack To as torian essa tive ic na and or In re lt illth. uskin were . umula perhaps na yt ed financial causes. as self-enriching at “provide torian Un be ls bo is st h, yt ”. wa collec dt verse. ”i tur Smith by fac toy eddies han “v ys at “oper haul on the on toil “the socially term. profit rt xes” hink wh cash sa applied proper to od arious but e. nd al the Ta t, widely ’s sag he ,t critic, at mark This n ted tably ich to ex and the ted man .T there riches points he efi x or Mo Ye ers at wrote hird and e, life. the pe It on ne he ing… for term t ty an st nse et y ” y , is a ar dark en welfare for when la to st illth, merely to though, res [the ern yb 2. Th vironmentalism. ge Ru tored himself… ehind th merchant er side contr skin admonition the for is PH ea ks st is to ya at ’s st could s not adic o the the the ipend progressive ea nw re than nd jus ’s sak on ting founda le hy IL help ]f xicon ”. tt the the eo tha unc it illt as od Id is the fi AN ti hs growth ‘I wrong entif tion it tion id ra bY the t, of ti ideas, does hould LL rich wa is s“ capitalism, An ying of clerg to undoubtedly no tt dr side Britain recognise Ru of ge ention TH which be TH more eo wealth ew yman tp skin of rofit Hil ’s ’s ’s ’s RO l ’ 4. PY fw ea lt h 1.

of abusing its monopoly power.We might prefer these businessmen to have theconcept of illth taken amore benevolent tack earlier echoesinthe rallying cries in their careers and perhaps made less profit as aresult. But would we then foranend to groWth be prepared to hand back some of the 2,800 libraries thatCarnegie backed, or accept hundreds more deaths from the illth-wealth divide and clarify polio and malaria in countries the the objectives of manylargewealth- Gates Foundation is helping? 1. creating companies. Another question for those aboy receives polio Theconcept of illth already echoes examining the blurred line between vaccination drops through the rallying cries of advocates illth and wealth is whether anylarge during acampaign in for an end to growth, such as Tim companycan avoid creating illth, even sanaa, Yemen 2. Jackson of UniversityofSurrey, who as it triestospread its wealth. John smokestacksinChina boils his radical messageabout the Mackey,idealistic co-founder of the billowout carbon need to find prosperitywithout growth Whole Foods chain of supermarkets, emissions into the down to “more fun, less stuff”.Prof once told me thatthe group had atmosphere 3. Jackson railed in arecent lecture “a much more positive impactin english writer and art againstthe “degenerative investment the world”now than it did when it critic John ruskin of speculative industries extracting was smaller,eventhough it attracts 4and 5. material resource and gambling on the constant criticism for having outgrown whole foods has value of stocks into the future” —illth its original principles. been criticised for outgrowing itsoriginal creation, in other words. Patagonia is famous for once principles Illth destruction is also implicit publishing an advertfor one of its in the purpose of companies such garments on the peak shopping day as Google, with its original “don’t be after Thanksgiving with the slogan evil” maxim, and Johnson &Johnson, “don’t buy this jacket”. It recognises whose “credo” includes the line, “We thateverything it produces causes mustbegood citizens —supportgood harm. Yetitcontinues to trytogrow. works and charities and bear our fair Rick Ridgeway,its vice-president of share of taxes”.Itisevenclearer in the public engagement, told me recently mission statement of Patagonia, the that“by remaining profitable, we can manufacturer of outerwear,which aims influence alot of [other] corporations”. 3. to “build the bestproduct, cause no Patagonia strives, through innovation unnecessaryharm, [and] use business and research, to reduce its impacton to inspire and implement solutions to the planet—tothe point thatitisnow 5. the environmental crisis”. exploring how to expand regenerative G

Ruskin, an angrypuristinmost farming thatmay actually yield anet er matters, would not have brooked any environmental benefit.

deviation from his high standards. Perhaps the truth is that, pace oomb bl

But wealth creation takes even the Ruskin, there is alittle illth in every s;

best-intentioned capitalists into greyer fortune. But recognising and naming Ge

areas, which the acknowledgement of the dark side to wealth could be the ima

illth helps us to explore. firststep towards an illth minimisation tY et

Forinstance, can philanthropy strategythat—who knows? —could ;G

convertillth into wealth? Andrew ultimately eliminate it altogether. rs Carnegie made partofhis fortune te eu from exploiting his workforce. Bill Andrew Hill is the FT’s r s:

Gates pursued aggressive business management editor and atrustee to practices thatsaw Microsoftaccused

of The Ruskin Foundation Pho

fT.cOm/weALTH|43 InVesTmenT |enTrepreneurs | philanthropy |correspondenT I “But and anniversar Pe the rela from to not congressman vote tried police political whose president on Tr America’ co political would rebuild more 20 shared Po political funding number houses. congressional his trips running ad concerned founda democr want hope 44 joined Boynton Obama included nM Th Th With Fo “T av n tt litics become 16 tor if the g dif tionships, only us Democr ferent elling |F here rB in re ey is when to to across to presidential to donors’ yw arch ferences. bea be ssional bridg gr things tions kind concern 1965. ac t. yrne, were places trus its In cross And hear use from of sys sys sys the an sc antees ap ith Co are hard yi and tb of st with yo unprecedented ac perspec about organisa you 20 Robinson, ivil US tem, tem tem, ti oppor itute. ilgrimag their nA ei the of .T at Fa the in delega la it quainted m/ marking av aR the fB tha at for np 15, philanthropis the dis members s, civil c nS of is comment ith to rights president ” he the de km merica. ag tention about include ”h ”s aisle. er wE right Democr loody fu it epublican among significance td ol amid Alabama’ tric the bridg dollars yh look velop elma, “Each tunit elec ins yl ay &P was ro tive, ea it US rights tions archers al tions ivide ic elp et arg sJ up t, titute health st dds. now “I olitics tion Br al the the th at Sunda with the who et yt ot also ac oe rug t’ but to these en Alabama. of the you comes from ac ins ag adle se made to the is us, Bar or receiving or he leader ro Go th health 50th the Re trip vitriol, and has sfi gle. yF umber organises asy wha as ac rowing there st titutions. are ts politicians ”h Fa wd egis emember of tr Edmund In nd American ack yB y, ldman, p reng rs personal in und, both need anscend the who hance ith es ublicans our dr was st up to not when from deeply t tt th ter yrne US Amelia itute ’s aw of ay y foc hose at & the then of of Ep a be to s. to our n us “I t sf ol 1. ph it or iC il So an bY the the gr ver an ex par work facing ke providing elec at ants Es It ample, ep improving Sa online yc tly American In tions also tablished ra tr of oncerned, ve on de the to ack th hM the st FF funds —f media it the iga pla tr US of gives ur Democr aining rom tive tform health local the political Pr to ra projec ”G ro organisa ess oU address funding Y Ne nuts voting oldman and mo for tha ac In ws of ts yF and st poll th journalism, sys na Ne tha itute. technologies tions py und problems elps tional to tem, tw nD bolts work sa ta Tu ork ys. re is people such rboV the ers. foc of aimed and with used at cr as ote, Fo to r io billionaire dollars polic fac par tog to Fa gr of reques to elec ants Behind Me ith bipar the upda t-finding et ties tions acy yp her nS an &P As ta to of for te roblems. tisan while, pen politicians na olitics and organisa Pierre the their founder of bsentee trips f-the-record In rela mak fund to voter st In Omidyar promote tions, itute, foc tions es st are of itute, from ballot. used it regis eBa easy the which the such ,t dif mee y. as on tr the charitable fund he to at ferent well as comple ion brings tings building regis the mak as or ter and to x es , philanthropicsupport of democratic systems remains tiny compared with fundsthatflowinto healthcare andeducation

3.

2.

1. newyorkersjoin a “It’ssomething he’s cared about for a global climatemarch long time and since eBaywent public, outside the city hall in november 2015 his philanthropic efforts have always 2. included supporting civic engagement Presidentobama and elections,”saysGoldman. “And he and marchersonthe verymuch comes at this work from an edmund Pettus bridge anti-partisan position.” in selma 3. Of course, for some donors, there is ohio voting stickersin an agenda to be advanced. Billionaire march 2016 TomSteyer,who founded NextGen Climate to campaign for climate action, recently announced thathis group plans to spend at least$25m to encouragemore young people to vote. Steyer’s motivation comes from data showing how interested young people are in climate change. “Eightyper cent of people under 30 in the United She believes other donors are now States want an accelerated move to more prepared to back initiatives clean technology,”hesays. “It’sone of supporting democracy. “Philanthropists ahandful of issues on which theyare are veryclear thatweneed to fund this g

er veryengaged.” and more are getting involved in this Yet, theyare also less likely than most issue,”she says. oomb to participate in elections. “In2014, Even so, the amount of philanthropic bl

s; theyhad verylow participation rates dollars being directed towards support

ter in terms of showing up at the polls and for democratic systems remains tiny voting,”saysSteyer. compared with the funds flowing reu s; This is something he hopes to into causes such as healthcare and ge changebylaunching avoter outreach education. While US foundations ma

yI campaign on collegecampuses. make$54bn in grants everyyear to a tt “Whatwe’retrying to do is to talk wide rangeofcauses, when it comes ge to them about the climate and… how to supporting the health of democratic s:

to much is at staketoencouragethem to systems, the figure is about $1.4bn go to the polls.” since 2011, according to the NewYork- Pho Young people are not the only group based Foundation Center. thatdonors want to see becoming more “The foundations in this field are engaged in the political process. doing fantastic work,”saysGoldman. ForBetsy McKinney, supporting “But there’s not enough attention being democracymeans helping more given to these issues.” women to become involved in political Also, as he puts it, the stakes could processes —something she does hardly be higher.“Thecombination of through the It’s Time Network, which hyper-partisanship, moneyinpolitics she founded and funds through her and struggling media has created privatefamilyfoundation. significant problems for our political system,”hesays. “You can see the results in how ‘a healthydemocracy deeply distrustful the public is in cannot be sustainedifthe political institutions —and ahealthy democracycannot be sustained if the public doesn’tbelieve in it’ public doesn’t believe in it.”

Ft.Com/wEalth|45 PART PHILANTHROPY THREE of afive-part PRIVATEFOUNDATIONS serieson foundations BY SARAHMURRAY

SEARCHINGFOR THESWEET SPOT

n1995, Charles Mohan and his wife Parent ProjectMuscular Dystrophy. Adrienne were mourning the loss of And while overall venture capital Gina, their 15-year-old daughter,who funding for biotech companies has not died from amitochondrial disease. diminished, says Stevens, thenature of I“Wewerethe typical husband and firms’ investments is changing. wife sitting across the table asking, “Traditionally,theyfunded more ‘Whatdowedonow?’”hesays. The early-stagecompaniesand nowthey’re following year,Mohan joined several funding morelater-stagecompanies family foundations to create the thatarecloser to market,” she explains. Pittsburgh-based United Mitochondrial Thisiswhere family foundations Disease Foundation, which has now can step in. “Theycan help bridgethe funded more than $5m in research to gap between our understanding of find acure for the disease. disease, the basic biologyand how it Thefoundation is not alone. Families gets into adevelopment pipeline and affected by disease are making a pushed through by alarger company,” growing amount of philanthropic says Stevens, who until recently led the funding available to medical research. Milken Institute’s FasterCures, which Much of this goes to academic research focuses on accelerating medical research. NT centres. But, increasingly,foundation “That’s the sweetspot for philanthropy.” DE funding is also providing seed capital Moreover,family foundations can for medical start-ups —filling gaps left have an impactbeyond funding, adding

SPON by other forms of funding. to the bodyofknowledgeonadisease In the US,this amounts to about 3 and tapping into their networks to find RRE per cent of all medical research funding, candidates for clinical trials. “Even CO says MelissaStevens, executive director the smallestfamily foundations have | of the Center for Strategic Philanthropy alot to add in termsofparent and

PY at the Milken Institute. “But it can have patient experiences and networks with

RO an outsized impact,”she says. clinicians,”saysHawkins. This is partly because of shifts in They can also raise awareness of the venture capital landscape. “The diseases. “Families with financial ANTH 2008-09 financial crisis took alot of resources can organise communities IL the wind out of alot of venture funds,” to advocate for more resources for the PH says Al Hawkins, who has raised capital issue theycare about and can galvanise | from foundations for research and thatcommunitytofund-raise,”says

RS clinical trials for several start-ups. “So Melissa Berman, president and chief

EU there was abiggerfunding gap than in executive of Rockefeller Philanthropy

EN recent years in biotech and the disease Advisors. In fact, she sees these

PR foundations came in and filled that.” philanthropists as more collaborative Hawkins’ start-ups have been than most. “There’s aclear recognition TRE beneficiaries. Forexample, at Milo thatifyou’re dealing with arelatively

EN Biotechnology, his current start-up, rare condition, you have to form a | funding for clinical trials for gene NT therapy technologies for muscular ‘FAMILIESCAN ORGANISE

dystrophyhas come primarily from OCK ME

foundations —somefrom families ST :I ST COMMUNITIES TO ADVOCATE

whose child has the disease and some TO VE

IN from larger organisations such as FORMORERESOURCES’ PHO

46 |FT.COM/WEALTH ‘YOU HAVE TO BE VERY TRANSPARENTABOUT IMPACT BECAUSEFAMILIESOFTEN WANT SOMETHINGNOW — ANDTHATRARELYHAPPENS’

establishing afundraising strategy andbuildingawebsite to creating a scientific advisoryboard. Meanwhile, the Milken Institute provides supportthrough its philanthropic advisoryservice. “We work with families to help them understand thelandscape, the stateof the science, the unmetneeds and how besttodeploy theirphilanthropic asset to fill the funding gaps,”saysStevens. Another thing that can be hard to grasp is how long it takes before research translates into atreatment for patients. Ann Boyd-Stewart, assistant dean for development and alumni relations at Indiana University’sLilly Family School of Philanthropy,says: “You’re starting from tragedy and that can be so emotionally charged. Youhave to be verytransparent about impact because families often want something now —and thatrarely happens.” However,when donors understand the timelines required for drug development, philanthropic capital has an advantageoverprivatesector investors –itcan buy time. “For some Disease foundations communitytoadvocate and to get of these technologies, time is one are effective at shining attention,”she says. In this, technology of the mostimportant things,”says a light on rare diseases has done much to help, giving families Lindy Fishburne, executive director of that have littleappeal to bigpharmas away to identifysimilarly affected Breakout Labs,afunding and support families and form online communities. centre for radical science thatispart However,becoming engaged in of the Thiel Foundation, created by funding medical research is not easy. PayPal founder Peter Thiel. First, families need to getuptospeed on She sees another benefit to complexscience and the latestresearch. philanthropic funding —the Then there is setting up the foundation willingness of donors to fund where, in addition to the normal development of cures for diseases that, incorporation processes, theyneed to because theyare rare, do not attractthe makesure their board of advisers has attention of industry. the right skills and knowledge. “The disease foundations are really In the US,the National Organization powerful partners,”she says. “They’ve for Rare Disorders (Nord), anon-profit gotthe constituencythatneeds the organisation, helps families takethese drug and will engageand move forward steps. Nord offers training, mentoring when it might not hit the hurdle rate and advice on everything from for atop-10 pharma company.”

FT.COM/WEALTH|47

Correspondent romania

bY Andrew MAcdowAll in TrAnsYlvAniA

rootsreclaimed

regor Roy Chowdhury the Danube Delta for twoyears. pauses for thought In January1990, justweeks outside his family’s stout after communistdictator Nicolae but elegant 17th-century Ceausescu’sdeath, the countess G manor house deep in returned to Romania. Thefollowing the Translyvanian countryside, as the year,the government passed its first sun strakesthrough the surrounding lawonrestitution, introducing the fir trees. principle of restitution in kind, that “Throughout history, every30 is the return of properties thatare years someone [has] tried to takethe claimed, rather than by compensation property from us, but for some reason with other assets, such as shares we were stupid enough to come back,” in acompanylisted by the Fondul he says. “I thought thatnow Romania Proprietatea, ajoint-stockenterprise is in the EU,things would be better,but established by the Romanian state. 1. it’s nonsense.” In 1998, the Mikesfamilywon a Roy Chowdhuryisthe scion of two courtcase on the ancestral estate, aristocratic dynasties, one Bengali, government has stepped in, supporting 1. which returned partoftheir property, the other Transylvanian Hungarian. claims thatthe interests of Hungarians the mikes family’s including the manor house and several Thelatter,the Mikesfamily,has had in Romania —at1.2m, one of Europe’s manor house in buildings thathavebeen transformed zabala, romania property on this site in the villageof largestethnic minorities —are 2. into aboutique hotel, and parkland. Zabala, once fortified againstraids being threatened in property cases, Gregor roy In 2002, Roy Chowdhuryand his from invading armies, since the 15th againstabroader background of chowdhuryand his brother Alexander moved to Romania nt century. It is now engaged in its latest marginalisation. daughters to work on the restitution process,

nde battle for ownership, this time with the “Hungarian communities in Gregor having given up alucrative job Romanian state. Transylvania are in amuch more in the CityofLondon to do so. po TheMikes family’s struggle is difficult position than theywere in the Between 2004 and 2006, by

res symptomatic of the knotty problem years immediately following Romania’s going through painstaking legal and of the restitution of property seized accession to the EU [in 2007],”says administrative procedures, the family

cor by the communists in Romania after Zoltan Kovacs, aspokesman for reclaimed more land including 3,500

| the second world war.Manyfeel Hungarian prime minister Viktor hectares of forestofthe 12,000 they thedifficulties around restitution, Orban. applied for.Roy Chowdhuryestimates py including the disputes and challenges, Kovacs says cases of “the theyhaveinvested¤2m, including ¤1m ro is still having acorrosiveeffecton nationalisation of Hungarian private to turn partofthe estate into ahotel property…raise serious doubts as to popular with visitors from Bucharest Nth property rights and the country’s investment environment. whether Romania is truly complying and beyond. Guests currently stay in la

hi Restitution has long been acomplex with requirements to uphold the rule ahalf-timbered building below the issue but has been lent afurther degree of lawand with the obligations which it main manor,while alarge, peach- |p of controversy in recent years by accepted upon its accession to the EU”. coloured structure overlooking green rakezic rs whatRoy Chowdhuryand others see Roy Chowdhury’smother Katalin, fishing ponds and blossom trees, which Na eu

as backtracking, with stateagencies the Countess Mikes, and grandmother until 2005 was astate sanatorium, is Va Jo eN fighting for property thatcourts have Evawere hauled from their beds on being refurbished. Nearby,the estate s;

pr ordered to be given back to its original the night of March 31949 by the gamekeeper prowls with abow and Ge owner. police as the Stalin-backed Romanian arrow. ima

Many laythe blame at the EU’sdoor, communistregime seized properties ty Ntre

which has not concerned itself with from aristocratsofall ethnicities. et /G |e the push for greater restitution since Katalin, now 72, remembers walking ‘I thoughtthatnow NG Nt

Romania joined the union, allowing across broken glass to the front door; lai populistdomestic politicians against the lastshe would see of her home for RomanIa Is In theeuRopean me the process to gain ground. more than four decades. She was sent Nick s: st unIon, thIngs wouldbe Theissue in Transylvania has to live with relatives in Austria while Ve oto

iN become so heated thatthe Hungarian Evawas shipped to alabour camp in betteR,but It’s nonsense’ ph

50 |ft.Com/wealth ‘thRoughout hIstoRy, eveRy 30 yeaRs someone[has] tRIed to take thepRopeRty fRom us,but foRsome Reason we weRe stupId enough to come back’

2.

ft.Com/wealth|51 nt nde po res cor |

py 1. ro

Nth In 2013, however,Romsilva, the state cut-offpoint of December 2005 for forestrycompany, lodged aclaim for ‘Inthe communIsteRa, claimsofrestitutiontobefiled, but in la hi 3,500 hectares of the estate, claiming we [weRe] enemIesof practice courtshaveallowedchallenges it had been incorrectly restituted. Its to continue, while55-60per centof |p claim was backed by the local prefect, thestate andsometImes cases are still unresolved,saysBryan rs the ministryoffinance and the state we feel we aReenemIes Jardine,partneratlaw firm Wolf eu restitution commission (the ANRP). Theiss in Bucharest.

eN As aresult, forestrywork has been of thestateagaIn’ “The process has been re-injected

pr suspended, resulting in the 150 jobs it with uncertainty,”hesays. While he supported in three surrounding villages case was thatthe land was not the believes changes to restitution law dwindling to just30. Mikes’sin1947, when it was seized by in 2011 and 2015 have improved the Ntre Naturally,the Mikesfamilydisputes the state, aclaim thatthe family says is rights of bona fide owners, and title |e the forestrycompany’sclaim of clearly disproven by documentation. insurance is more widely available,

Nt ownership, pointing out thatthe Were the Mikesfamily case unusual, he notes thatdisputes are having “a countess’sgrandfather had successfully it might be written offasmisfortune, chilling effectoninvestment”. me fought for the land during Romania’s but there are hundreds of such He emphasises thattheyare by st agrarian reforms in the 1920s. struggles across Romania. no means limited to the Hungarian Ve

iN One of the contentions of the state’s Theoretically,there wastobea minority. “We’ve seen itfor years, even

52 |ft.Com/wealth ‘theRe aRenoconsequences foRnot executIngfInal decIsIonsofthe couRt. It’s a lIabIlItyfoR InvestoRs—and dangeRous foRthe state, as It couldcReatechaos’

further piece of paperwork. “There are no consequences for not executing final decisions of the court. It’s aliabilityfor investors —and dangerous for the state, as it could create chaos.” Likemanyothers, he sees the easing of pressure from Brussels following Romania’saccession to the EU as the reason for backsliding on restitution. Rozsa cites cases involving Canadian and German citizens of Translyvanian descent, as well as Romanians and Hungarians. 2. Manuel Costescu, secretaryofstate for trade and investment, says it is possible some rightful owners are 1. from his base in the elegant university being caught up in anti-corruption the mikes cityofCluj. “It’sanabuseoflaw —you allegations, as the authorities family estate go to Bucharest, wait 10 years for your 2. address suggestions of fraud in past Nicolae ceausescu rights and then it starts over again. In restitutions. delivershis televised the communistera,we[were] enemies He insists thatRomania’sinvestment Newyear’smessage of the stateand sometimes we feel we environment and judicial system have in 1977 are enemies of the stateagain.” significantly improved over the past TheRomanian government insists twoyears, adding thatecological issues, thatits minorityrights legislation is and endemic illegal logging, exacerbate among the strongestinthe EU,aview s

Ge the challenges of restitution in forestry. supported by Jardine, the Bucharest

ima But it is not justformer noble lawyer,and manyordinaryRomanians.

ty families who have been caught up In ajoint statement, the ANRP and et in restitution wrangles. Some of the the department for foreign investments :G highest-profile cases involve churches. and public-privatepartnership oto Between them, seven predominantly (DFIPP) said thatintheir view ph Hungarian-speaking Catholic and “difficulties signalled by certain former in developing shopping malls in and Protestant dioceses have submitted landowners only represent isolated around Bucharest,”Jardine says. 2,147 applications for restitution, a cases” among 5m property deeds issued While title disputes are common little more than half of which have for land ownership alone since 1991. across central and eastern Europe, reached aconclusion. But the Hungarian government particularly where restitution in One prominent case is thatofthe is clearly worried about restitution kind has been practised, in Romania 18th-centuryBiblioteca (library) problems affecting Hungarians and the challenges by statebodiesonproperties Batthyaneum in the old walled city country’smanypredominantly ethnic whose restitution has been ordered of Alba Iulia, claimedbythe Catholic Hungarian churches. by the courts, seem to be agrowing Church but remaining in statehands “One of the conditions of Romania’s problem. despite having been put on alistfor accession to the EU was the return In some cases, including 35 or so “urgent restitution”in1998. Thelibrary of unlawfully confiscated church in Transylvania’sMures countyalone, has 65,000 valuable books and codices, properties —including Hungarian stateagencies have refused to return with the dispute arising partly over the ones,”said Kovacs. “This is not only properties, says JozsefRozsa, alocal meaning of an 18th-centurywill. about the freedom to practise one’s lawyer.“Theproblem is thatdecisions “If the statecan’t identifyanother religion in one’s mother tongue — are not executed,”hesays, adding owner —itjusttakes the property,” says schools, care homes and children’s thatcases drag on for years, with Zoltan Ferenc Ballai, chieffinancial homes are also maintained by the stateinstitutions always demanding a officer of Romania’sReformed Church, church,”hesays.

ft.Com/wealth|53 FAMILY OFFICE HARRIETAGNEW

@HarrietAgnew

BALANCINGTHE EBBAND FLOW

uddy Enterprises was founded one of its creditors issued a winding- $15.2bn to impact investments in 2015. in 2011 to develop digital up petition over its failure to pay While banks and diversified financial health tools in collaboration interest. The fate of the fledgling digital institutions plan to commit less capital with the National Health health service illustrates the potential to the sector, family offices plan a BService. Rooted in social clash between financial and social steady level of activity over the next impact, the initiative was designed to considerations in the growing field year. They typically make social impact support mental health patients and of social impact investing. It can be investments through equity (primarily take the pressure off the understaffed seen as a cautionary tale for the family private equity) and real assets, rather and overstretched NHS. offices and advisers trying to navigate than debt. The team developed the BuddyApp, this deeply fashionable sector. It is a market that is fragmented a text-messaging service linked to a According to the Global Impact and opaque. There is a paucity of web application that let mental health Investing Network’s 2016 survey information on the size of the industry patients manage their care between of the industry, its more than 150 and the performance of social impact sessions, at the same time as giving respondents managed $77.4bn in projects. The industry also suffers from their doctors a wealth of information. impact investing assets and committed a lack of transparency on the huge The health social enterprise received diversity of risk and return profiles £300,000 in backing from one of across the spectrum, and a lack of the pioneers in the sector of impact ‘SOME CLIENTS WANT standardised impact metrics and investing, Big Society Capital. THEIR CAPITAL DEPLOYED IN methods. So far, so good. Until earlier this year. Family offices are also coming under Buddy Enterprises was shut down after A MORE CARING WAY’ pressure from the next generation,

1.

5 4 | F T . C O M / W E A LT H 2.

which is encouraging a greater focus on 1. caring way,” says David Scott, founding the years it can take for a social impact responsible investing. Weighing expectation partner of Vestra. investment to break even. They also “The millennial generation is with what can be Vestra will work with clients to have unrealistic expectations as to the delivered is tricky pushing their parents and the 2. help them decide how much money financial return they can make. corporate world to do more,” says Alexandre Mars, they want to put into social impact “There’s a mismatch between people’s Alexandre Mars, who runs the Epic founder of the Epic investing, the level of financial return financial return expectations and what Foundation, which aims to create Foundation they are looking for and the sorts the market of social impact investing tools to help people give to charities of areas they are interested in, be can deliver,” says Chris West, a partner Y

T dedicated to children and young it women’s health, environmental at Sumerian Partners, which advises on T E

G people up to the age of 24. conservation or education. It will then philanthropy. / S A

I A desire by the millennial generation conduct due diligence on potential West believes that while most social L E to do more with their money is one investments. The key for Vestra will impact investors are looking for returns L E

A of the reasons that Vestra Wealth, a be educating clients on the tension of 5 per cent a year, annual returns are F A

R £6bn wealth management boutique, between the financial return and the more likely to be in the range of 1 per ; H

C is planning to launch a subsidiary social impact. cent to 2.5 per cent. I R

E called Tribe Impact Capital later this A lack of appropriate capital across For Vestra, all of this means that P L

A year to provide advice and investment the risk/return spectrum is perceived while in principle their plan to help C

S management for clients who want as the most limiting characteristic of clients invest in social impact is a very A P : a social return as well as a financial the market, according to the GIIN commendable one, it would do well to S O

T return. “Some clients want their capital survey. Many investors who come with advise them that returns from social O

H deployed in a more thoughtful and a financial mindset are not aware of investing can be low and slow. P

F T.COM/WE ALTH | 55 book review thefractured republic

@danielbenami bY Daniel ben-ami

howtohealamerica’s greatdivide

uval Levin maybeaself- avowed conservative, but he takes aim at both sides of America’sdysfunctional Ypolitical divide in this perceptive look at the country’sacute crisis of social fragmentation. TheformerWhite House staffer under President GeorgeWBush sees both progressives and conservatives as wallowing in unhealthynostalgia. The Fractured Republic argues eloquently thatstriving for abetter future means resisting romanticising the past. Republicans, in Levin’s view, tend to hark back to 1981. In the firstfull year of his presidency, the conservative RonaldReaganset about implementing free market reforms in earnest. Thenostalgia of the Democrats, in contrast, looks to the GreatSociety of 1965. That was the high point of the Lyndon BJohnson administration’s campaign against poverty and racial injustice. Neither side, Levin argues, has the answer to the mostpressing contemporarychallenges facing the US.The left is too wedded to statism and the right too often favours a hyper-individualism. Neither,inhis view, is up to the urgent task of uniting America’sfractured society.Both social orderand economic security have been weakened. Thepolitical system shows little awareness of these problems and is, in anycase, ill equipped to deal with them. Levin’s concerns are widely shared among social thinkers, although their exactdiagnoses and conclusions vary. RobertPutnam, aHarvard academic, has bemoaned the decline of social capital in US society.Bill Bishop, aprominent journalist, has used demographic data to show Americans increasingly choose to live with like-

56 |ft.com/wealth 1. ahomeless person in asubwaystation near the whitehouse in washington dc 2. ronald reagan talks tax in 1981,the time for which republicans are most nostalgic, 2. Yuvallevin says

minded neighbours. Charles Murray,a is better able to devise solutions. His conservative academic, has noted how preference is for reinvigoration of apowerfulupper class has separated whathecalls mediating institutions in itself from the restofsociety. society:astrengthening of community ForDemocrats, and those who life. As aself-professed conservative, he more generally define themselves naturally sees the family as playing a as progressive, economic inequality central role in achieving this task. But is generally central to this concern. he also argues for increased importance Typically,theycriticise the ostentatious to be attached to liberal education (as and heartless super-rich for detaching opposed to vocational learning) and itself from the restofsociety. greater civic engagement. Above all, he Levin recognises thathigh inequality emphasises the importance of religious is arealitybut is surely right to argue institutions, as he sees these as adirect thatitisaneffectrather than a challengetothis fractured age. cause. Thewealthy,for instance, have This emphasis on mediating benefited from the booming of the institutions is in line with his support financial sector and financial assets for whathecalls amodernised politics over the years. But to see this trend as of subsidiarity—the idea thatkey the main reason for America’sfractured decisionsshouldbemade as close to the society is misleading. communitylevel as reasonably possible. Conservatives also identifyagrowing Despite the manyinsights in Levin’s social divide but theytend to see it work there are good reasons to call in moral and cultural terms.Levin is some of his keypoints into question. influenced by Murray’s observations on Forexample, there is alot of emphasis thegrowingsocial divide between those on rebuilding institutions but much with auniversityeducation and those less on the ideas needed to develop a without. common outlook. It is perhaps not surprising that He also fails to explain adequately collegegraduates suffer lower whyinequalityhas become such a unemployment. But theyalso tend widespread concern. Theirony that to have significantly higher marriage the super-rich and powerful are often rates, lower divorce rates and more the mostconcerned about widening religious commitment. inequalityistoo often missed. In large While Levin is critical of both partthis reflects an insecurityamong

s conservatives and progressives, he the elite itself.Ithas lostconfidence in er argues, not surprisingly,thatthe right its hold over society. ut

re The Fractured Republic should be s; required reading for all those trying to ge understand contemporaryAmerica. ma AboveAll,levin emphAsises Yi

tt theimportAnce of The Fractured Republic: Renewing ge America’s Social Contract in the Age nn/ religious institutions, of Individualism by YuvalLevin ma

tt As he sees theseAsA (Basic Books, $27.50) Be

s: direct chAllengeto

to The writer is the author of Ferraris

Pho this frActuredAge for All (Policy Press 2012)

1. ft.com/wealth|57 AMBITIOUSWEALTH STEPHENFOLEY

@StephenFoley

FROSTY RECEPTION

hen today’sbillionaires Centralbanks were more than willing are awoken from to buy up the extragovernment bonds, their cryogenic sleep in the name of quantitative easing, as and have their brains the bond market maven Bill Gross had Wattached to their new predicted in 2016,but thateventually robot bodies, whatwill theydiscover stoked inflation thatundermined the about how the economyhas changed? value of UBI. They will discover thatgovernments Governments scaled back social introduced auniversal basic income programmes for the mostneedy,such for citizens, to counter the collapse as people with disabilities, the mentally in employment thataccompanied ill and the elderly,infavour of the automation and to free people to universal payment. Plentyofyoung pursue more meaningful activities. people were able, as aresult of UBI, Thetechno-utopians of the early to go into the world of volunteering, 21stcenturyseized on the idea thatthe but the philanthropic impulse was not government should payeverycitizen enough to alleviate the extradistress. enough to live on. Of course theydid. UBI was conceived as acontract Driverless vehicles wiped out jobs under which the beneficiaries of in the trucking industry. Internet automation —such as tech companies shopping, automated warehouses and in the second decade of the century, Today’sbillionaires themselves and the other businesses drone deliverydrastically reduced found enough evidence to silence mayawake from their thatare able to slash costs, as well retail sector employment. Pattern- the doubters, though no study could cryogenic sleep to as tech companyfounders and the afutureriven with recognition software was better at capture the impactonafull economy. the same injustices employees who built and supervised diagnosing disease and robot surgeons Conservative welfare reformers and and inequality they the robots —subsidised the losers of were less accident-prone than their liberal youngsters had combined to thoughttheyhad left automation. Except thatcompanies human forebears, so medical doctors makeitanunstoppable cause, however, behind with afiduciarydutytotheir went the wayofthe shaman. and UBI was introduced in some form shareholders, and wealthyindividuals Theentrepreneurs who pioneered or another around the world. with their pick of international these technologies risked supplanting Thecryogenic dreams of aworld where addresses, were no more willing to bankers in the pantheon of popular poverty and anxiety had been replaced voluntarily submit to higher taxes than villainyand auniversal income by opportunityand fulfilment did not theyever were. appealed as ameans of keeping the come true, however,instead, our frozen Piecemeal effortstoget them to pay mob at bay. billionaires reawoketoanightmare their fair share, such as limiting global There were other reasons, too, that where UBI had exacerbated class capital flows and tax competition between abasic income won supportamong conflictinmanynations and introduced jurisdictions, succeeded only in stoking

the moon-shooting investors of Silicon conflictbetween countries, too. international tensions. H IC Valley. They understood the freedom Governments had been faced with Meanwhile, inequalityhad not PER to pursue one’s ambitions thatcomes the same choices for UBI as theyare been lessened and the howls of AL

from not having to worryabout money. with all spending programmes: increase outrageovercorporateand individual SC They also remembered how lucky government borrowing; shiftresources tax avoidance were as loud as ever. PA E; theywere; how manypeople drowning from existing programmes; or raise taxes. Loud enough, in fact, to wakethe TIM in student debt had opted instead for a Politicians picked alittle of all of them, cryogenically undead. AMS

mundane paycheck when their talents but in aworld ofsoaring unemployment RE

would be better unleashed on arisky and plummeting income tax receipts, Stephen Foley is the FT’s US /D YA

start-up? each only seemed to makematters worse. investment correspondent KA

Trailblazers such as Facebook co- NS E

founder Dustin Moskovitz, through an CH

organisation called GiveDirectly,and Stephen is reading... Whenever Iwhip up amousse, or bread achicken breast, or tuck into an RE Sam Altman, president of the start-up omelette, Iwonder at how life would be so much less delicious without the chicken. But wheredoes the chicken PO S:

incubator YCombinator,who funded come from and how did it become aubiquitous part of our diet? Iknewnot, but Andrew Lawler did and TO universal basic income (UBI) pilots

his book WhyDid TheChicken Cross TheWorld? might be the best Kindle impulse purchase I’ve ever made. PHO

58 |FT.COM/WEALTH