ambitiouswealth NicolasBerggrueN privatebanks macau family offices SEPTEMBER2015 ft.com/wealtH 34 Issue PY ARS Ro Th EM AN dR Il gh AN

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FT WEALTH CONTENTS SEPTEMBER

THENEXT GENERATION

Entrepreneur and philanthropistAlexandre Mars wants to changethe wayinwhich people give. Wendy Schmidt, businesswoman and philanthropist, is funding environmental challenges through XPrize. And former “homeless billionaire” Nicolas Berggruen is looking to foster debate around issues of governance as well as philosophyand culture. Theera of passive moneyisover.Inthis, our inaugural edition dedicated to whatwehavetermed “Ambitious Wealth”, we look at howthe nature of wealth is evolving in the second decade of the 21stcentury.Gone are the days of simply writing acheque or having awingofahospital named after you; rich people of the newgeneration want to see their moneyatwork. They want to build the hospitals of the future. Over the coming issues, we will look at thecharacters 10 forming this band of newwealth. Theseare the entrepreneurs who are following in the footsteps of 14 FEATURES LarryPageand Sergey Brin who wrote in their original 10 HOMELESSNOMORE Google founders’ initial public offering letter thattheir The“homeless billionaire” is shareholders should not be surprised if theyplaced on acrusade for ideas on his “smaller bets in areas thatmight seem veryspeculative or next big investment even strangewhen compared to our current businesses”. 14 ART Whatare theglobal challenges thatthese ambitious Most damagetoworks of art individuals face—and where might theyover-reach? Does occurs in transit —experts the wealthmanagement industryunderstand thatmoneyis are increasingly worried getting younger and hungrier? And whatare thedrawbacks of making so much moneyatsuchayoungage? 20 PRIVATEBANKS TheUKfinancial system As ever,wevalue your views, particularly on the new needs achangeinmindsetto direction, so please do drop me an email at theaddress work with entrepreneurs below. 24 PRIZOLOGISTS Thepower of prizes has been Hugo Greenhalgh, Editor rediscovered to encourage [email protected] innovation

32 MACAU YOUR NEXT FT WEALTH As the crackdown on graft deepens, China’smain 23 OCTOBER2015 gambling resortissuffering

4 |FT.COM/WEALTH 5 H| LT nagement, Special EA mily Ma FT /W Fa nd writer rrish ia alth ta OM Pa As ompanies editor We anagement editor .C sar od yc riter ournalist FT tm chael Crabtree Le estment correspondent ej Go fastFT iberras sw ournalis sse eput Mi nv contributor intern nhalgh

rt ambitious wealth NicolasBerggrueN privatebanks macau familyoffices SEPTEMBER2015 ft.com/wealtH 34 Issue yriakos ej eX ournalist ya sd la Boulton ea ofessional FT FT eK wis, Daniel Gree reelanc leri sUSi FT’ Pr ggi Ley Le entral Europe correspondent is the digital and communities editor Dominic org T’ missioning editor for af Va go reelanc Ja is an wis-Coste, Philip sc is founder of Business is is deput egular reelanc Ge APH af eF om Hu ing Le is the reelance j than Saunders is af FT’ ar ac Emily GR af th is lead writer of Ch na Rohit is th is is is ion is CH Andrade Jo UTORS is editor of TO rriage Ru ionship director for at ay ley RI is the incent Gee ARS RoPY at yde n-Ami rr ias- azlehurst EM Ma HO tor ditor ANTh ney PE Fo NdR RIB lgh oy hIl lberge cK Mc xA Fr arwick- nder ENhA wV Be Bo ec alth editor AlE Mu EUPP ye yH public RP YiNg UR Ba Mo AL hUgo gRE yF hAk ir BY Be he ENE aA PR Pa yW iT SToS We VE dison nisha Jha TRE nr ly FT NT blishing systems manager ri td SC trick oduction editor argus O’Sullivan EN FT rem wA

CONT CO PA Ma Je Sarah Fe Sub-editors Reports Stephen He Pa Andre Rhoden-Paul Picture editors Global sales director Global rel banking and finance Ma Pu Andrea Da Yu an Emma Matt Luc of Ar Advertising production Daniel Special reports editor FT Deput Pr

LOBR;CALEBIBBY CHARLIE BLOOMBERG; R; HEIDINGE JEAN-MARIE S; GE MA NI RIDGEMA ;B ES NOBL OT SC P; :A TO PHO ts efi ng pic at tep up ealthy esti ae ts IONS Jan empire oid untries, nv on ’s av SS ni is sofw om burdens PA or Co eund ce mus rs re always land ey whe ffi Fr Po sa family businesses Po Ma st ackro FFICES risis yo TIONS he trial ge ourn MENT GHT eautiful game ople xb usiness guru nt DA YO ar yj NS tac Pe amil ST eb olving demands ei SI yb OK REVIEW wl UITIES UN IO lczyk is Caroline ef MIL litics is powering the ev ssion fir ak IN EQ FA SC CRIME CORRESPONDENT FO INVE BO AMBITIOUS WEALTH PHILANTHROPY Th to Ho Eights tips on how not to repor prepare to pass on the baton Alexandre st Reputation and high-profile individuals Wh charit Ku builder Donors recognise the ben by of outsourcing to Pa comple Rich in th Po dreams of migrant children 58 38 40 42 46 48 50 52 54 56 58 58 42 24 24 arted to CUS st GS FO IN MENT od works EN ST go ld is regaining its glister one for sins? OP INVE THE RICH COLUMN Go Are at 8 6 INVESTMENT FOCUS LUCY WARWICK-CHING

GRAPHIC BY RUSSELL BIRKETT

GOLD REGAINSITS GLISTER

nvesting in adollar-denominated assetwithnoyieldwas never going to be an easy sell.But withequity markets in turmoil, interest in gold hasbeenrisingsteadily onceagain. I Gold was seen as asafe havenafter the 2008-09 financialcrisis, rising to $1,900anounce in 2011 before falling back to alow of $1,077 in July.Research by BullionVault, apeer-to-peer gold Year-on-year quarterly exchange, reveals nearlyhalf of gold mine production increased and silver retail investors predictthe gold pricewill end 2015 at least 10 3% per cent higher than it wasatthe startofthe year.Whereas the 1970s bull to E14 marketwas driven by inflation, this year it hasbeenuncertainty, particularly over 787tonnes The London the state of the Chinese economy,that Docklands postcode has brought investors back to gold. in Q2 2015 from washome to more In the short term, however, recent gold-owning residents in 2014 events have shown gold to be volatile. than anyother UK postcode As the US economy continuesto (Source: BullionVault) recover,making arise in interestrates more likely,pressureonthe gold price 763t could continue. Trying to predictits level is afool’s game, drivenmore by in Q2 2014 46.6% sentiment than fundamentals. Yetin times of turmoil, gold resurfaces as a of UK gold and potential safe haven, confirming its silver retail investors appealtoinvestors concerned about Recycling predict gold will have the strength andsustainabilityofthe levels fell risen in the 12 months economic recovery. W to December 2015 8% (Source: BullionVault) 422oz Central bankscontinued year on year to to be strong buyersof the largest ever gold gold, accounting for bullion trade made via a smartphone.The sale,in 251t Zurich in May2013,used 137t BullionVault'siPhone app from in Q2 2015,slightly down (Source: BullionVault) on the equivalent quarter 273t last year but up 45%-50% 11% in Q2 2014,resulting of global demand forgold comesfrom on the previous quarter.Itwas in total supply falling China, so aweakerrenminbi makes the 18th consecutivequarter in which commoditiesmoreexpensivetoimport central bankswerenet purchasers (Source: Sharps Pixley) 5% to 1,033t (Source: World Gold Council) (Source: World Gold Council) 6 |FT.COM/WEALTH Performance over fiveyears $1,087 (Gold, cumulativereturns, %toMay 21 2015) Gold price per troy ounce on August 42015, Top3funds afive-week high following yuan devaluation (Source: Sharps Pixley) Smith &Williamson Global Gold &Res A -16.1%

BlackRock Gold and General AInc -16.4%

6% BlackRock International Rise in bar and Gold &Gen -16.4% coin demand in China, Q2 2015 Bottom 3funds 42t Junior Gold CAcc -28.4% 30% (Source: World Gold Council) WAYCharteris Gold & Fall in bar and coin PrecMtls Elite IAcc -25.4% demand in India to Amundi FdsEqGlobal 37t Gold MinesFU-C -23.7% Source: Morningstar (Source: World Gold Council) 4.50p Shareprice of Kibo Mining, the London-listed Tanzanian mining, exploration and development company, down 12% oversix months (Source: Bloomberg)

…while the US and sawcontinued Europe growth, rising wasup Global jewellerydemand fell 2% 1% China, down and 14% to India, down to 5% 23% to to 26t 15t to 513t 174t 118t (Source: World Gold Council) in Q2 2015 compared with the same period last year

FT.COM/WEALTH|7 theRIchcolumn matthewVIncent

@MPJVincent

PRInCIPLeofGoodWoRkS

eople in high places are Management, is an example of generally expected to remain financiers doing good for their own resident (if not tax domiciled) sake, abetted by averydifferent type of on the moral high ground. “conviction politician”. p They do not lie or cheat; UBS’swealth management division theyare only ever,asBritish politician had been directing billions into and diaristAlanClark infamously put philanthropic projects long before its it, “economical with the actualité”.And investment bank briefly allowed Tom even then, if their economybecomes Hayes to earn himself afew million apparent, theyare typically so mortified and the nickname “The Machiavelli thattheyimmediately seek to atone of Libor”. However,its newfund, through tireless good works. managed by social investment John Profumo, likeClark, ajunior specialistResonance, is instead minister,having misled parliament designed to attract“profit-seeking about his familiaritywith aSoviet capital” to projects thattackle poverty attaché’sfemale companion, felt by offering clients both afinancial compelled to resign and spend his return and evidence of ameasurable, next 40 years cleaning the lavatories positive impactonpeople’s lives. at acharityinLondon’s EastEnd. Jamie Broderick, chiefexecutive of That he also, unlikeClark, devoted his the UK wealth management business remaining energies to the alleviation of for UBS, says this matters because the poverty and, unlikeClark, bequeathed available pool of profit seeking capital the world agenuinely funnypolitical is so much larger than the pool of “old epigram (Nil combustibus pro fumo — philanthropy”capital. There’s no smokewithout fire) is less It Is temptIng to vIew UBs’s He viewsthe fund, which will mainly well remembered. laUnch of apoverty fUnd advance low-costloans to projects Jonathan Aitken, another junior providing access to employment and minister,used his imprisonment for as atonementfor... sIns affordable housing in the cityofBristol, MaGeS

perverting the course of justice to as one of the mostefficient ways of yI find Godand his ensuing freedom $600m fine, beatprostate cancer and Reformed: Ivan putting profit-seeking capital to work to disseminate Psalms, and alms, to became ahealthcare philanthropist. He Boesky,Wall Street’s on social problems. Investors are the needy.More recent ex-minister funded so much research thatFortune real Gordon Gekko, offered apotential post-tax internal Ion/Gett

spenttime helping the Ct and justice perverter Chris Huhne, magazine gave him anew title: “The homeless afterhis jail rateofreturn of about 8per cent, and, on finding thatAitkenhad sent man who changed medicine.” sentence under the applicable UK tax rules, oLLe him several verses, deemed them Similarly,IvanBoesky, Wall Street’s proof thattheir moneyhas done good. SC “marvellous”.WhatGod remarked on actual Gordon Gekkoand convicted And it is the politicians who brought MaGe

being found by Aitken is not recorded. insider trader,emerged from his own in the tax rules thathavemadeboth eI Even politician and fictionalist 22-month sentence to spend time the returns and the impactpossible.

JeffreyArcher dedicated his own helping the homeless. Under UK social investment tax relief, he LIf It is tempting, therefore, to view /t gaol term for perjurytoenriching the investors are granted 30 per cent MP

literarycanon and the lives of airport UBS’slaunch of afundtotackle upfront reliefonsums theyinvest, Ca book purchasers with… OK,soit poverty as atonement for an ex- meaningthe social enterprises they doesn’t always follow. employee’s sins (justlikeProfumo back do not have to meetahigh costof odfIn

But the principle is not unknown and Aitken’s charitywork or Milken’s capital to produce the return. Wo in high finance, either.Remember philanthropy) given the 14-year prison At present, the tax reliefislimited to S/ Michael Milken, Wall Street’s“junk sentence recently handed down to a investments of up to £275,000 in any bond king”? After earning $1bn in four former star derivatives trader. one organisation. Still, as theyprobably aRMaRa years, he was indicted on 98 charges Tempting, perhaps, but entirely said to Profumo when he arrived at the nM of securities fraud, insider trading wrong. Because the Resonance Toynbee Hall charitywith his mop and oh :J

and racketeering, served 22 months Bristol Social Investment TaxRelief plunger: it might not be much, but it is to of a10-year prison sentence, paid a fund, sponsored by UBS Wealth astart. W Pho

8 |ft.com/wealth

Homeless no more: after 14 years of living in five-star hotels, Nicolas Berggruen now has apartments to call his own positivethinker nicolas berggruen is on acrusade forideas

BY stepHeNfoleY

top the ramparts of the old fortress cityofAigues-Mortes, gazing in the direction of the Mediterranean, Nicolas Berggruen is contemplating the Crusades. Aigues-Mortes, 17 miles from Montpellier in southern France, is from where the sainted Louis IX twice set sail with the aim of capturing Jerusalem and glorifying Christianityinthe 13th century. Berggruen, the French- born German-American dual citizen who for adecade was known as “the homeless billionaire”,drifted into town lastmonth to walk its impressive walls, to see the sturdy towers thatprotectits perimeter and to soak up its history. Berggruen’s contemplation is not so much of the dates and the deeds of the crusaders, he recalls in conversation later,but of the ideas thatmotivated them, habits of mind thatare at once alien to us in the modern world and yetcan appear to have echoes in modern conflicts. Ideas, it is clear to him, have the power to move kings, OmBeRg

lO the power to raise armies and to shape history. Ideas are going to be Berggruen’s next big investment. eed/B Theson of Heinz Berggruen, an artcollector who BR

:J fled Nazi persecution in Germanyand befriended Pablo

TO Picasso in Paris after the second world war,Nicolas

PHO Berggruen parlayed his father’s fortune into amuch larger one, now estimated at about $1.5bn, through ➤

fT.cOm/wealTH|11 financing leveraged buyouts, property development and stock investing across the world. Hisnew Institute of Philosophyand Culture is launching with some ambitious talk: it wants to be “midwife” to newconceptual frameworks thatcan rank alongside the Reformation, the Enlightenment, Marxism or the Washington Consensus. Berggruen is planning a“secular monastery” for debate and contemplation alongside aNobel-sized prize for newideas. Rock star philosophers Bernard-Henri Lévy and Slavoj Zizek already command hugeaudiences, and fees, so can one man’s millions makeadifference? “One potential advantageofprivatewealthisthatit can takeonthings thatare not immediately measurable,” Berggruen says. “If you are acharitable organisation or government organisation or abusiness you have to deliver reasonably tangible results for your constituency and on arelatively short-term horizon. We can takethe risk of investment in something thatisvaluable —and the world of ideas is aworld that’srisky.” Berggruen earned the “homeless billionaire” moniker in 2000 when, at the ageof39, he sold hisproperties in NewYork and Florida and decided to live only in five- star hotels, zipping between them on his Gulfstream jet. As such, he has been taggedasapersonification of the rootless global elite, with aplayboy lifestyle to match, thanks to his regular appearance at lavish parties and (until recently) his own annual bash in LosAngeles for the Oscars. Except that, lastyear,hepurchased apartments in Los Angeles and NewYork —“comfortable places, with nice views” —soitistime for the press to come up with anew nickname. This is assuming he sticks with his purchases, 1. about which he does not seem enthusiastic. In fact, he sounds positively exasperated. “If you have aplace,you have to think about what it looks like. If you want to wash up you have to have atowel.You have to think about all types of physical things. Lights, for example. If you care about aesthetics you can’t help yourself but spend time on it. I’ve found it 1. rooted. Ifind so manyplaces interesting and therefore verytime consuming. Thequestion is, is it agood use of artcollector Heinz Iamless attached to one place. Theinstincttowantto time?Hotels are still the bestformula if you can afford berggruen, nicolas’s have anestisquite healthyand normal. There mustbe it because you don’t have to worryabout your physical father something unhealthyabout me, but there we are.” 2. needs as much.” Joseph stiglitz, Theother question is, of all the cities in all the world, We are having our conversation about the Crusades, nobel prize-winning whydid he pick those twotoput down hisexperimental about ideas, about settling down, over aropeyFaceTime economist roots? Is he playing local property markets? connection where his backdrop todayisthe generic 3. “No, personal preference. NewYork is one of the Historian Timothy wood panelling of ahotel suiteinLos Angeles. It will be gartonash world’s greatmetropolises. LA is acityinthe making; it manymonths before his West Hollywood apartment is 4. doesn’t have an urban centre the waymostcities do, so ready.This is the firsttime he has used FaceTime and he author francis it allows aphysical and mental space thatisveryunique. is doing so on his phone. He asks if he can put it down, fukuyama California is aplace of invention, it is Pacific-facing, rather than having to hold it, but Itell him this would 5. which Ilike, while NewYork is Atlantic-facing, Old The medievalwalled rather defeatthe purpose. None the less, Iamstaring city of aigues-Mortes World, and Europe-facing. Ifind America so willing to at his hotel ceiling when Iask him about the “homeless in southern france experiment and allow ideas. Youhaveasense of freedom billionaire” nickname, so Ican only hear his face and asense of afuture thatisunique and thatisvery screwing up with displeasure. energising.” “I’mveryhappy to lose thatmoniker by spending time It is tempting to think of Berggruen’s progression alittle bit more rooted, even though Istill don’t feel very from rootless playboy as akind of reverse mid-life crisis. Where other men reach for adolescent toys and inappropriate flings, Berggruen rekindled amuch more serious teenagepassion, one for political debate and “tohaveanest is healthy. philosophy. theremustbesomething He recalled his young left-wingeryinaLunch with the FT afew years ago, telling us he “wouldn’t learn a unhealthyabout me” word of English [atschool] because that’sthe language

12 |fT.cOm/wealTH Berggruen says up to 50 thinkers could live for weeks, “the ancientgreeksfelt months or even years at astretch in whatwill be “a that enquiryisexciting physical place, but also amental place, where we give the body and the soul some freedom to explore and invent andithinkso, too” 2. and communicate”. He goes on: “Todaythere are lots of ideas generated everywhere and published everywhere. Short-term of imperialism”—his family’s firstlanguageisGerman conversations, theyare many. Ideological conversations, —and claiming to have been expelled from aSwiss theyare many. But is there alongerterm, thoughtful boarding school for sedition. reviewofthese ideas? If you step back alittle bit from Now, he calls his investing career “a long detour”from the daily pressure of winning arguments thatisthe place thatpassionfor philosophy. Reignited with discussion where we can maybe be helpful.” sessions and salon-style evenings with Universityof After wrapping up our video call, Irealise thatIhave California professors, the passion turned, amid the panic learned verylittleabout Berggruen’s own personal of the financial crisis, into the idea for the Berggruen philosophy. He has given no impression thathebelieves Institute on Governance. Itsfounding principle is that his wealth has accorded his views anyadditional governmental institutions are not fit for purpose in profundity. Theonly clue was in his recollection of that the globalised 21stcenturyand it has been pressing dayinAigues-Mortes lastmonth. for stronger powers for the G20, greater European 3. “Monotheistreligions are veryinterested in integration and reform of California’sbroken budget conquering other hearts and souls,”hehad said.“Louis system. Berggruen has peopled his institute with was aking who became veryreligious. He was incredibly statesmen, economists and business leaders ranging dedicated and Iwas thinking, ‘How different is thatfrom from Tony Blair and Joseph Stiglitz to Elon Musk. whatwedid in Iraq and whatishappening in the Middle TheInstitute of Philosophyand Culture, meanwhile, Easttoday?’ It really isn’t verydifferent.” has advisoryand academic boards totalling 60 thinkers, Ifollow up later in aphone call: does he believe in

including Francis Fukuyama, the political scientist, BlOOmBeRg God? He pauses, as if to decide if the question is too

Wang Hui, an intellectual historian of Tsinghua s; personal. University, Beijing, and TimothyGarton Ash, the ge “I am not religious is the bottom line,”hesays historian. ma eventually.“Religion as adogma can be dangerous. It can yI “I am not going to be apologetic about it, there is inspire, yes, but it enslaves the mind at worst.” eTT aselfish element here,”Berggruen says. “The ancient /g But on God? Another pause. “I wish Icould be Greeks felt thatenquiryisincredibly exciting and I fP convinced, but Ican’t be.”Isuggest,maybe it is a :a think so, too. One of the amazing things thatmakes us 4. TO challengethatthe philosophers he is gathering together humans is thatwecan think and speculate and invent will takeup? “Well, Iguess we are open to ideas.” W PHO and imagine, and whatgreater intellectual pleasure than being able to think about these things and have access to unbelievable minds, creative minds, minds that transform who we are?” Whereas Berggruen’s governance institute styled itself cutely as a“thinkand action tank”,the philosophy institute can be called athink-tank unselfconsciously. It has setdeeper questions, from the contradictions between harmonyand freedom to the nature of mankind’s relationship with technology, with the particular hope of sparking newideas by joining the philosophical traditions of eastand west—apassion of Berggruen’s and the inspiration for abook he co-wrote in 2013 called Intelligent Governance for the 21st Century: AMiddle WayBetween West and East. Theaim is to go far beyond personal indulgence and to have real impactinthe world of ideas. The$1m Berggruen Philosophyand Culture Prize for aliving thinker whose ideas have deeply influenced our world is meant to rank alongside the mostfamous prizes for science and the arts. Theinstitute will organise symposiums, promote books, produce documentaries and run apublic competition celebrating new philosophical thinking. It has signed up seven elite universities, including Stanford in the US,Cambridgein the UK and Peking UniversityinChina, to afellowship programme. But perhaps the mostintriguing piece of its work, plans for which are still only on the drawing board, is the creation of asecular monastery, “an updated version of 5. an old idea” common in western and eastern cultures.

fT.cOm/wealTH|13 15 20 on nd lo s, ac /d so as ccession Pic su s; BRidgeman image ”: eVe eR “l ’s so cas of Pi to Pho

14 |ft.com/wealth A rt in transit is fraught with dangers. With so manyexhibitions, auctions and fairs being staged worldwide, the movement of artisconstant. Forklift trucks have rammed crates holding paintings, bubble- wrap has left its distinctive pattern on picture surfaces and lorries have broken sculptures beyond repair. Insurance statistics paint aworrying picture. “Sixtyper cent of all artclaims are works in transit, in some size, shape or form,”saysRupertOnslow, an artunderwriter at TheChannel Syndicate, aspecialist insurer at Lloyd’s.“That’s without doubt. Everyone says ‘whatabout theft?’ But theft is really quite rare. Losses occur when the pieces are at their mostvulnerable— when they’re moving. If awork is hanging on the wall or sitting on aplinth,minding its own business, it’s pretty sound and secure.” He adds: “The moment you touch apiece, you can slip and fall; you can drop it. It’s rarely done through carelessness. Accidents rangefrom aforkliftgoing through acrate to the simple ‘oops, dropped it’.” Michael Daley, director of ArtWatch UK,the art world watchdog, warns thattreasures are being put at risk by “exhibition mania”,with major institutions “tapping into this harvestable market of people who will paytosee greatart.Sothere’s more and more traffic.” He despairs at the number of works thathavecome to harm on being moved. Themostserious cases include handlewithcare Picasso’s “The Painter”, which was lost, along with 229 lives, when Swissair Flight 111 crashed in Canada in statistics painta 1998; Rembrandt’s “Portrait of an Elderly Woman”, which suffered alargegashafter being sent from the worrying picture Pushkin Museum of Fine Arts in Moscow to the Museum of Fine Arts in Houston, in 2001; and the 9th-century of thenumberof Book of Kells, reportedly affected by vibration after it was flown from Ireland to Australia in 2000. artpiecesdamaged But moving artwork even within agalleryisrisky, Daleysays, recalling a2008accident at the National whilebeing moved Gallerywhen a16th-centurypainting, Domenico Beccafumi’s“Marcia”,was damaged after being dropped BY DalYa alBerge during the dismantling of atemporaryexhibition on ➤

ft.com/wealth|15 Renaissance Siena. “After the accident, it was said by the gallery, in its reportofMarch 2008, thatthe panel is ‘fragile’and will ‘never be allowed to go out on loan’. But thatdoesn’t stop them from loaning other things, even morefragile, likeLeonardo da Vinci’s‘Burlington House Cartoon’toParis. Thecircus justgoes on.” Daleyalso questions the British Museum’s decision to lend hundreds of antiquities to the Zayed National Museum in Abu Dhabi for up to five years. “This includes prime works from the Assyrian reliefs from the Nimrud Palace, the site that’snow under the control of Isis. Before theyagreed to do that, they’dsent the carvings to Shanghai. Thejetshad to stop overnight in Azerbaijan, which is hardly the safestplace in the world, Iwould have thought.” ABritish Museum representative challenges the criticism. “Asthe mostgenerous lender in the world, the museum is well practiced at ensuring our loans are safe and secure during transit, travelling along only established flight routes.” Other expertsacknowledgerisks,but argue that paintings and sculptures are safe as long as owners do not skimp on packing and transportation. Julia Nagle, an independent restorer and conservator who has worked extensively with the Tate galleries, praises the care and professionalism of museums, but is regularly shocked by the sorrystate of privately owned works brought to her following unfortunate transportation. She sees an averageofone torn canvaseverymonth. “We’ve gotapiece thatwas painted on hardboard with a big hole in it. It was rammed by aforklifttruck.” 1. Bubble wrap is the particular enemyofcontemporary paintings, she says: “People think bubble wrap is the right thing to use —something soft. But oil paintings 1. takeseveral yearstoharden properly.” 2. aminawright, curator of fine art, inspects British artistLinda Alexander had used it to wrap one paintings stored in the of her floral paintings before delivering it to aclient, only vaultsatthe holburne to discover thatithad left its pattern across the surface. museum in bath Nagle managed to save the painting by removing the 2. domenico varnish. She also restored a£100,000 painting thathad beccafumi’s“marcia” been severely damaged after rubbing againstits make- wasdamaged after shiftpacking, sticking to its surface. being dropped Her“patients” have included apainting pierced by a 3. table leg in atransportation lorryand apictureseverely rembrandt’s “portrait of an elderly woman” harmed at an artfair after falling on to another object had agash in it after when aforklifttruck went into anearbyflimsy wall. “It’s being transported all about knowing how fragile things are,”she says. Mari-Claudia Jiménez, apartner in Herrick, Feinstein’s international artlaw group in NewYork, warns of other pitfalls facing artintransit. She recalls handling alegal dispute involving a$300,000 sculpture thatwas ruined after aBritish gallerysent it to aUS artfair.“Theshipping cratewas made of acertain type of wood thatthe US requires be fumigated before shipment. As aresult, theyhad to takeitout of the crate to transportit. Asculpture with nocraterolling around in the truck gotcompletely destroyed.” ➤

“PeoPlethink bubblewrAP is theright thingtouse. —something soft”

18 |ft.com/wealth BRidgeman images y; alam d/ lt hiP Rs aRtne eP imag ge ta Ri he s; ge ma yi ett :g to 3. Pho

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4. to Pho

18 |ft.com/wealth “A fundAmentAlProblem is thAt theArt world As An industry is comPletely unregulAted”

Thegallery wanted to show offthe work at the fair, even though it had already presold it. Theshipper insisted thatitcould be repaired, but Jiménez argued thatitwas “a total loss” and therefore its buyer no longer wanted it because “it’s not an original perfectpiece”. Litigation followed, but the case was settled. Howard Spiegler,co-chairman of Herrick, says: “We trytotellgalleries thatwecould be veryhelpful before litigation starts in trying to prevent problems. But people are not looking for newwaystospend money.”They contacttheir lawyer after theyhavebeen burned, he says. Galleries will often send artworks to collectors “on approval” and Jiménez recalls one NewYork gallery sending acrateofpaintings worth manymillions of dollars to an extremelywealthycollector on an approval basis. Thecollector decided againstbuying them but “didn’t do agood job of packing them back up to ship back to the gallery”,she says. “When theyarrived, theywere destroyed as theydidn’t hire aprofessional shipper to have them sent back. Thegalleryhad to sue an important collector,which would obviously sever the relationship forever.” Privatecollectors enjoy lending, particularly as exhibitions in major institutions can increase values. Adam Prideaux of Hallett Independent ArtInsurance, aspecialistbroker, warns: “That’sall verywell until something goes wrong.” There is ageneral ignorance of the complexities 5. involved in lending, he says, urging collectors to check insurance and loan agreements: “When it goes wrong, it goes catastrophically wrong. It’s only afterwards you realise the insurers are trying to wriggle out of aclaim.” 4. don’t know whatthe exclusions are, theydon’t know Even minor damagecan affectvalues. Prideaux restoration of whether there are specific conditions to it. Then they has recently been dealing with acollector who lent paintings in the gallery have adamageand are told after the event‘our policy an installation by Ai Weiwei, the Chinese artist, to a of battles at versailles, doesn’t cover this or that’.” france Spanish museum, only to discover thattwo of the many 5. Collectors are now increasingly insisting that component pieces had been broken, cannot be replaced the9th-century book museums cover the lender’s own commercial insurance. and the insurer will not cover the loss. of Kellswas affected At this year’s ArtBasel fair,the Axa Artgroup staged a An installation once worth “hundreds of thousands by the vibration of a presentation offering advice to collectors on the fragile flight of euros” has been made “valueless”,hesays. “I find it nature of art. absolutely astonishing and Ireally question whether Martin Bijl, aleading Dutch Old Masters conservator anyone would ever lend if people knewthatthese are the and aformer head of restoration at the Rijksmuseum kind of things going on.” in Amsterdam, says thatworks damaged in transit have Louise Hallett,his business partner,says: “A “almostalways” suffered due to “a human mistake”. fundamental problem is thatthe artworld as an industry He adds: “I am working on alarge17th-century is completely unregulated. There aren’t anyformal canvasthat’sunlined, which is veryrare. It had been sent procedures to follow. to an exhibition and came back with asmall tear.Ithad Thelenders, particularly when they’re private been wrapped in agood case, so the only possibilityis collectors, have hugefaith in the museums thatthey’re thatithappened during transportation. That happens lending to because theybelieve thatthe museums with alargepainting because you have to go around absolutely know whatthey’re doing. corners.”But he says: “I consider these accidents still as “Theyaccept their loan contractwithout even really exceptions.” reading it and theyaccept their insurance without Sometimes, though, works can be damaged when knowing what’sinit. They getone piece of paper saying justhanging on awall. In 2006, Steve Wynn, a ‘we confirm thatthis work is insured as per the original millionaire casino owner,put his elbow through Picasso’s policy’.But theynever seethe original policysothey masterpiece, “LeRêve”. W

ft.com/wealth|19 london calling UK BanKsneeda different mindset to worK with entrepreneUrs

BY Yuri Bender

ehavea saying in India,”reflects RajeshAgrawal, founder of RationalFX, aforeign exchangecompanyoffering online transfers. “When you are young, spend time with older people to become wise; when you are old, spend time with youngsters to learn newconcepts. “I am getting older.” At just38, Agrawal is already worth £90m, according to the SundayTimes Rich Listand has been running his payments companysince 2005. Dressed in abright pink striped shirt, greyjacket and canvasjeans, not so long agohewas at the same stage in life as some of the young people frantically trading currencies on phone lines outside his office. But Agrawal developed his entrepreneurial mindsetin the sleepy Indian hinterland, rather than London’s high- rise CanaryWharf. From the ageof10, his parents sent him from his home cityofIndore each summer to help his cousins in their family restaurant 60km away. Theyoung Agrawal refreshed the old-fashioned menus and designed an intercom system for waiters to relay orders to kitchen staff. After graduating in business administration from his local university, he moved to the northern cityofChandigarh, “the Milton Keynes ➤

20 |ft.com/wealth Silicon roundabout: London’s tech hub is helping to attract start-ups to the city liffe/BloomBerg tc ra is hr :c to Pho ft.com/wealth|21 of India, full of roundabouts”,tosell the services of aweb design companytolocal clients. “This was 1999. FirstIhad to explain to people what the internetwas —thatwas the hardestpart—and then how awebsite would benefit them,”heremembers. Agrawal’s pitches earned him aprized transfer to Mumbai and paved the waytoarisk management role in aforexcompany, offering the rare privilegeoffree internetaccess and contactwith international clients, one of whom offered him ajob in London, in 2001, where he found accommodation in Harrow,asuburb in the north-westofthe capital. “Itwas surreal. Iwas looking for high-tech hubs and skyscrapers, but found people speaking Gujarati, eating Indian foods and watching Bollywood films,”Agrawal recalls. “Here Iwas in acompanywith 20 people, only two of whom had computers. This was the 21stcenturyand one lady had the job of printing offall the emails and distributing copies to staff,”hesays, still struggling to hide his incredulity. “InMumbai we all had laptops, the latestsoftware and could work from home when necessary. London didn’t even have fastbroadband or dial-up connections.” But it was the UK financial system he found most primitive, especially compared with Indian institutions. “Banking was veryexpensive and service levels poor,” Agrawal says. Transfers between accounts in the same bank cost£30 andtookthree days. “I could never 1. understand whythis was.” This lack of cutting-edgeservices led him to setuphis own electronic transfer business in 2005 with afellow “I DON’TBELIEVE THEREIS Indian expatriate, stealing amarch on UK banks plagued by apoor reputation from overcharging. ANYPLACE TO STARTUPAN “The whole reason thatbusinesses likeours existis ENTERTAINMENTBUSINESS because the banks are not doing their job properly,” says Agrawal, looking out across arainyCanaryWharffrom APARTFROMLONDON” his 32nd-floor office. Small and medium-sized enterprises have been hard hit by the mis-selling of derivatives and structured According to the Tech Cityinitiative and Oxford products, he says. “Banks need adifferent mindsetto Economics, London is awash with digital entrepreneurs. work with entrepreneurs, who want abank to help them By 2025, theyestimate there will be 45,000 digital grow.But unfortunately,theysee moneyasmoney, technologycompanies in London, generating more than wherever it comes from.” £12bn for the city’seconomy. Agrawal started his business with a£20,000 car loan, London wins hands down as abusiness, technology despite never having held adriving licence, and pumped and financial hub to attractstart-ups, says Mads Munk, the cash straight into his start-up. Just days earlier, aDanish media entrepreneur and chiefexecutive of the his bank had refused a£10,000 requesttofund his M2 group, who has chosen the UK’sfinancial centre for ler business. the expected flotation of an entertainment unit. ow “I know plentyofsuccessful entrepreneurs who only “I don’t believe there is anyplace to startupan nf

survived by maxing out credit cards for finance, after entertainment business apartfrom London,”says simo their ideas were turned down by banks,”hesays. 47-year-old Munk, who worked in abetting shop in Y; He is much more complimentaryabout the UK’s London’s Highgate for twoyears in his teens, living in a

infrastructure, business climate and —sometimes — YMCA hostel, before returning home. lie BiBB positive approach to immigration, which has turned Hisfirstbusinesswas selling popcorn, before he London into an “entrepreneurial hotspot”. eventually formed his M2Film venture, which has char s:

Agrawal, who is been backing Labour politician Sadiq achieved success in producing animations for several to Khan in his mayoral candidacy, employs 70 staffof22 high-profile companies. Pho different nationalities. He employs 230 people in London, Mumbai and “If you turn immigration off, you will have ahuge Bangkok, posting apre-tax profit of £2.9m 14.in 20 skills shortageinthis city,”hesays. “You can’t getskilled “Currently there is no city, apartfrom London, really people in Paris as the immigration system in France is so biting at our ankles,”hesays, recovering with abeer and poor.InLondon, you have Indians and eastEuropeans cheeseburger at the Groucho Club,aprivatemembers’ working side-by-side in fintech start-ups. Youdon’t get club in central London, after an overnight flight from this anywhere else.” LosAngeles.

22 |ft.com/wealth Munk claims London offers afavourabletax environment for the film industry, top-qualitystaffand “THERE SHOULDBE access to investors and financial services. BANKSDEDICATED TO Themostvaluable of these to his global business is currencyexpertise. “Wehavealot of activities in ENTREPRENEURS” Thailand and the baht can easily lose 20 per cent. That is alot of moneywith the margins we are working on and we need insurance againstthis.” banked with them for 15 years and theyhavenot built up Most banks as yetfail to meetthe needs of agood picture of me, nor are theyabletooffer atailored entrepreneurs, particularly in the digital sphere, claims personal experience.” 31-year-old James Haycock, aserialentrepreneur and While entrepreneurs are clearly disappointed with the founder of Adaptive Lab, whichdevelops technology services banks are providing them, manyleading wealth solutions and innovations for major companies. managers are stepping up their efforts to service this “Asanentrepreneur,myexpectations are setbymy growing sector. daily digital experiences,” says Haycock, in his office An HSBC PrivateBank representative says, “all of our above acafé in the shadow of Old Street’sSilicon clients are entrepreneurial” and it provides “critical” Roundabout, on the edgeofLondon’s trendy Hoxton. regular networking events. “I don’t see thatquality offered by either my personal “There are certainly more clients who fit this bank or the company’sbanks,”hecomplains. “I have description than ever before andtheyare younger, coming from all over the world,”saysDina de Angelo, director of PictetWealth Management. “London is

3. increasingly important. Geographically it is in the best possible position.” Despite criticism of banks from the business community, she says, “the pace of changewithinthe industryisimproving on everylevel,mostnotably in the digital space”. Banks are increasingly targeting entrepreneurs according to their business sector,such as financial services, newmedia, energyorhealthcare. “Weaim to create an exclusive, discreetand relaxed atmosphere, where wealthyfamilies are able to grow their knowledgeand share strategies confidentially,” says Luigi Pigorini, regional head for Emea of Citi Private Bank. However,heapplies an element of caution about potential customers. “Likeall client segments, we are selective in which start-ups we takeonasclients,”he says. Berenberg, aGerman bank increasing its presence in London, is also aware of the need of manystart- ups for additional finance and aims to facilitate these deals where possible. “Wetry to supportstart-ups by introducing possible business partners from our network, or privateequityinvestorsorfinancing partners,”saysDominik Helberger,head of the entrepreneurs desk at Berenberg. It is this networking thatgrowing businesses find invaluable. “There should be banks dedicated to entrepreneurs, who can put them in touch with one another,organise classes, mini-courses and networking events,”says Agrawal, complaining thatthese facilities are scarce for smaller,more innovative entrepreneurs. European banks should learn from “more pro-active” US peers in Silicon Valley, he adds. 2. But lessons from Silicon Roundabout can be just as valuable for the banks. “A lot of people makejokes about nerdy Hoxton types and our own Tech City,” 1. Jameshaycock says Adaptive Lab’sHaycock, who was actually born in 2. Silicon Valleybefore returning home. “But we are on the mads munk map globally and punching above our weight. There are 3. events in the evening, it is vibrant and you bump into rajesh agrawal people with ideas in the coffee shops. We have created a cluster thatattractstalent.” W

ft.com/wealth|23 to boldly go thepower of prizemoney is rediscovered to spur innovation

BY Stephen FoleY photograph BY ScottnoBleS

n1906, Lord Northcliffe, the proprietor of Britain’s Daily Mail newspaper,offered a£10,000 prize to the firstaviators to cross the Atlantic Ocean, just three years after the Wright Brothers ascended into the skyatKitty Hawk. Thenotion thatanyone could getacross a2,000-mile stretch of water was so preposterous thatitpromptedthe satirical magazine Punch to offer prizes of its own: £10,000 apiece to anyone who could swim the Atlantic, travel to Mars and back, or journeytothe centre of the earth. Lord Northcliffe gotthe lastlaugh, of course. With his moneyand his mouthpiece at the Daily Mail, and his political connections, fewpeople were able to champion the possibilities of air travel —for scientific progress, for business and for warfare —soeffectively.His newspaper offered astring of smaller prizes for smaller aeronautical feats before the big one was finally won on June 15, 1919, when John Alcock and Arthur Brown inelegantly landed their modified Vickers ynVim ose firstinanIrish bog after a 16-hour flight from Newfoundland. Acenturylater,the power of prizes to spur innovation has been rediscovered by anew generation of wealthy individuals. Exploring space or finding extraterrestrial life?Cleaning the oceans or clearing the atmosphere? Curing disease or looking for the keytoimmortality? Foranyone with ambitious goals, offering aprize can get you abiggerbang for your buck than traditional giving. Think of it likeleveraging your investment portfolio: a carefully crafted challengespurs spending by competing teams thatcan add up to manytimes the value of the prize purse. “Itissomething likethe opposite of the traditional model of philanthropy,” says Paul Jacobs, who is executive chairman of Qualcomm, the microchip manufacturing giant founded by his father in 1985, and whose charitable arm is going to give $10m to anyone who can makethe Tricorder from Star Trek areality(of which more in amoment). “People are always sceptical about charitable organisations and about how manyoftheir dollars ➤

24 |ft.com/wealth freshwaters:wendy Schmidtisfunding environmental projectsthrough XPrize

ft.com/wealth|25 “startrekwasn’t atVseries; it wasa business plan”

spirit of the Orteig prize to the commercial space race. Twoyears later,hetravelled to St Louis to launch a competition to build areusable craftfor suborbital space travel. TheXPrize was born. Theship thatwon thatfirstprize, a$10m cheque from the Ansari family,whose wealth was built in the telecoms equipment industry, is now partofSir Richard Branson’s Virgin Galactic venture. XPrize is the biggest and bestknown of the private organisations running such challenges, with some $100m of prizes either awarded or still up for grabs, seeking adizzyingly diverse rangeofbreakthroughs including stamping out adult illiteracy, radically improving the clean-up of oil spills and landing robots 1. on the moon. Theorganisation is closely allied with Google —orAlphabetasweshall soon have to start calling it —toreflectits ambitions to move beyond search engines into technologies such as drones, self- driving cars and internet-enabled thermostats. A$30mlunar lander prize is sponsored by Google. LarryPage, the company’sfounder,isatrustee and Wendy Schmidt, wife of Google chairman Eric Schmidt, has twice dipped into her family’s fortune to fund environmental challenges through XPrize —something she says she would love to do again. “When Eric and Idoanything, we are trying to look at transformational changeand trying to look at systems change,”Schmidt says. “This is an urgent problem. We are looking at the outcome of acenturyofmaladaptive behaviour,when it comes to the human interface with the natural world. We’redepleting things, we’reusing reckless technologies in the oceans, we’redoing things thatmaybe create a better standard of living for people in the shortterm, but in the long term they’re simply not sustainable.” Schmidt’s firstforay into prizologycame after the 2. Deepwater Horizon oil spill in the Gulf of Mexico in 2010, when it became painfully clear thatclean-up technologyhad not advanced in the twodecades since the Exxon Valdez tanker spilled gallons of crude oil in 1. actually gettothe cause thatneeds funding,”Jacobs the Gulf of Alaska in 1989. Thewinning design, using atricorder prop from says. “Inthe traditional model, you put in moneyand spinning plastic disks thatattract the oil, proved it could the 1998 star trek film

somewhatless of it than you put in gets there. In prizes, skim oil from the surface of the water at more than four imageS Insurrection 2. somehow more moneygetsthere than gets put in.” times the industrystandard rate. tY aworker usesa Today’sprizologists taketheir inspiration from another In July,Schmidt awarded her second XPrize to vacuum hose to figure in aviation history, Raymond Orteig, aFranco- acompanycalled SunburstSensors, which won a captureoil from the American hotelier who, justweeks before Alcock and competition to develop adevicetoaccurately track hive/get deepwaterhorizon Brown’s voyage, offered $25,000 for the firstperson from the acidification of the world’s oceans, aproblem with rc spill in 2010 Sa anyAllied countrytoflybetween NewYork and Paris. potential dire consequences for marine life. 3. ew

charlesLindbergh By the time an obscure air mail pilot from St Louis, Prizes allow for the possibilitythatinnovation could YN alongside his plane Missouri, called Charles Lindbergh pipped better-funded spring from somewhere unexpected, anywhere in the il Da ‘the spirit of st Louis’, and better-known teams to the prize in 1927,the nation world, she says, citing the LasVegas tattoo artistwho in 1927 rk

had become obsessed with the feats of engineering and sketched his oil clean-up idea on the back of acasino Yo

design, and daring, of the competitors. napkin and ended up among the semi-finalists. ew

Peter Diamandis, ayoung scientistand entrepreneur Thelistofillustrious prizologists grows longer ;N aP

who had been trying to build companies launching seemingly by the week. Elon Musk, the PayPal co- S:

satellites into space, read Lindbergh’s account of his founder who now runs both SpaceX, the rocket company, to

transatlantic flight in 1994 and resolved to bring the and Tesla, the electric car manufacturer,isfunding ➤ Pho

26 |ft.com/wealth 3. Next year,Trekkies worldwide will be marking the 50th anniversaryofthe startofthe original series, while the Trekkies at XPrize will be awarding the Qualcomm Foundation’s $10m to the developer of areal-life Tricorder,the handheld scanner used by Dr McCoy for sensing, computing and recording medical data from patients. TheTricorder XPrize is down to seven finalists now, including teams from India and Taiwan as well as north America. While wearable fitness trackers and healthcare apps are becoming ubiquitous, the competition aims rg to show theycan be combined with accuratemedical mbe diagnostics, made easy enough to use to genuinely “put healthcare in the palm of your hand”. Thedevice and any

S; bloo attachments mustweigh less than 5lb, monitor five vital signs and detect15medical conditions, according to the mage

Yi rules. tt ge S: to 1. Pho

aGlobal Learning XPrize for software thatcan teach children anywhere in the world the basics of reading, writing and arithmetic. BarbaraBush, the former US firstlady,issponsoring an adult literacyprize. TheMethuselah Foundation, 3. whose backers include Peter Thiel, the billionaire libertarian, and LarryEllison, founder of Oracle, will reward breakthroughs in growing newhuman tissue and 1. elon musk of spaceX neworgans. 2. ABill and MelindaGates Foundation challengeprize paul Jacobs, spurred the universityCaltech to invent aself-cleaning, Qualcomm chairman solar-powered toiletthatturns human waste into 3. hydrogen and fertiliser. peterdiamandis, founder of Xprize Following the examples of these modern-day Northcliffes and Orteigs, governments are also again getting back into the prizes game. 2. In the US,the website Challenge.gov has centralised and encouraged prize competitions across 75 government agencies, from Nasa to the US Mint, Even before it has been awarded, the leverageonthat awarding more than 400 payouts totalling more than $10m is being felt. One of the teams, Canadian company $120m in four years, and Darpa, the US Defence CloudDX, is already taking pre-orders for its Vitaliti, a department’s research arm, has launched multimillion- necklace thatcan track vital signs and fitness. dollar prizes for self-driving tanks and maintenance Scanadu, amedical device venture headquartered droids. out of aNasa research centre in Silicon Valley, has Things have come full circle. As early as the 16th re-engineered its business in the hope of winning the century, the Spanish royal family was offering money prize for its grab-bag of medical kits, including ablood to anyone who could solve the accursed problem of pressure monitor called the Scout, which users press accurately pinpointing aship’s longitude while at sea. againsttheir forehead, all of which connectwirelessly to TheBritish government’s Longitude Actof1714offered asmartphone app. rewards for improvements in navalnavigation and gave Star Trek “wasn’t aTVshow”, says Walter De Brouwer, the world the marine chronometer. Scanadu’swild-haired founder.“It was abusiness plan.” Last year,the National Lottery-funded National TheTricorders are undergoing testing with real Endowment for Science, Technologyand the Arts in the volunteers in San Diegoover the next fewmonths, before UK established anew Longitude Prize, which will hand awinner is crowned in time for the publicityaround the out £10m for a“cost-effective, accurate, rapid and easy- golden anniversary. to-use testfor bacterial infections” to help combatthe Qualcomm’s Jacobs says Diamandis had him sold on rise of drug-resistant bacteria. the Tricorder prize within moments of starting his pitch Designing agood prize is an artand ascience. The for sponsorship. “Weall grewupwatching Star Trek; it’s challengemustbesufficiently ambitious but conceivably whyevery engineer is trying to work on Star Trek things.” attainable. Theprize moneyhas to be the right amount If Punch magazine were still publishing, it would no to attractthe broadestrangeofparticipants and it has to doubt be offering asatirical “Warp Drive XPrize” and be calculated to capture the public’s imagination, too. PR ribbing today’sprizologists as mercilessly as it did Lord is partofthe game. Hence all the Star Trek. Northcliffe. But who really will have the lastlaugh? W

28 |ft.com/wealth

32 |ft.com/wealth game changer macaumorphs from gambling haventofamily- friendly zone

BY Patrick McGee

tisaSaturdaynight in peak season AugustatApex, an elite club in China’sonly legal gambling region. Theentertainment is baccarat,aluck-driven card game thattakes fiveminutes to learn and fewer than 30 seconds to play, with aHK$10,000 ($1,300) per hand minimum. But the invitation-only game on the 39th floor of the Conrad hotel on the Cotai Strip in Macau is eerily quiet. Seven of the 10 tables are empty. One man is loudly betting 10 chips at atime, but mostplayjust one. Nobody glancesatthe line of slot machines or the one roulettetable. Bored staffoutnumber guests by three to one. Afew streets away at TheVenetian, the baccarat tables are bursting with energy. Here the minimum bets are HK$300 and the crowds are in their 20s and 30s. Atable with five seats has 15 or 20 people hovering, placing their own chips on someone else’s cards. Gamers do not justwager on individual hands; theybet on trends. When aluckystreak heats up, whether it is for the player or the banker,crowds flock to the table and betinunison. When the game dictates theydrawathird card, players tap the table hard and yell out, “Jiu!” —Mandarin for the winning number of nine. Losing hands are tossed back to the dealer with acontemptuous shrug. “It’sagroup mentality,”saysone player,watching. “They‘squeeze’the cards for suspense, folding them justenough to see the numbers, and the whole table gets involved.” As unlikely as it mayseem, this game of chance is almostalone responsible for the explosive growth

Macau has seen in the past15years.In2013, the alamy peak for gaming, justunder two-thirds of gambling y/ revenue stemmed from VIP rooms where baccarat is typically the only game played. But Beijing views graPh to this model as unsustainable and undesirable, driven ho by shady business dealings thatbypass China’sstrict wP

capital controls. :a

“Junkets”,the do-everything middlemen groups, to served as the economy’slifeblood. It is the ➤ Pho

ft.com/wealth|33 junkets’ role to lure wealthyChinese from the mainland into Macau’sVIP rooms, anonymously,then lend them cash so theycan throw HK$1m per hand at the baccarat tables. Chinese visitors are not allowed to enter Macau with more than Rmb20,000 ($3,100), nor can theytake out more than $50,000 per year.Sothe junketsoffer the VIPscash in local currency, backstop anylosses to the casinos upfront and then recoup the moneyinrenminbi. But there is asnag: Beijing courts do not recognise gambling debts, so if theyare not paid, the junkets have to rely on “extra-legal” means, which can include organised crime. Last December,XiJinping, China’spresident, intervened in Macau, warning of “certain deep-seated problems”.Before the clampdown began, about half the high-rollers in the region were government officials or executives at China’sstate-owned industries, according to 2010 research by the Macau Polytechnic Institute. Monthly revenues have now shrunk for 15 straight months, justasfastastheyboomed. In February, during the important Chinese NewYear period, game-spending fell by nearly half,the mostonrecord. Everymonth since has seen ayear-on-year decline in excess of 34 per cent. Shares of the six big casino operators have declined by two-thirds since their peak in January2014, wiping more than $100bn offtheir collective market value. “Obviously the slowdown in Macau is more severe in truth than anyofthe operators foresaw,”James Packer, Australian casino magnate, told CNBC in May. “It’svery hard to be critical of acorruption crackdown… [but] when and how thatends is something thatnoone knows.” Xi’snationwide clean-up is not aimed at Macau per se, it is directed at graft. But aVenn diagram comparing corruption in China with the drivers of the Macanese economymight justrequire asingle circle. Jamie Soo, gaming analystfor Daiwa Capital Markets, says the peninsula excels in four areas: gaming, money market (high-rollers playing baccarat)”. laundering, entertainment (including prostitution) and While the junket-fuelled growth model for Macau luxuryshopping (often linked to bribery). Xi has sent was always unsustainable, the speed at which deadly abattering ramthrough each of these pillars. So while curveballs were thrown at the industrycaught manyoff China grows at an estimated 7per cent this year,Macau’s guard. As Xi’scampaign againstcorruption ramped up economyisinrecession. In the second quarter alone it in 2014,Macau was hit by aseries of unfortunate events: shrank by 26 per cent. •InApril,asmall junket operator absconded with Macau, likeHong Kong, is aformer European colony HK$8bn-$10bn, highlighting arisk of capital flight and now a“special administrative region”ofChina with hitherto ignored. its own laws and currency. Whatfinance is to Hong •InMay,the Macau authorities cracked down on the Kong, gambling is to Macau, it’s often said. This is a illegal use of UnionPay terminals thatallow even small- gross understatement: finance accounts for 16 per cent time gamblers to bypass capital controls. of Hong Kong’s GDP; in Macau, gaming is half the •InJuly,transit visas were restricted to stop high-rollers economyand drives 85 per cent of government revenue. from taking multiple trips to Macau under the guise of Gambling was made legal in the 1850s but it was only in business. 2002, after the 1999 handover from Portugal, thatthe •InOctober,smoking was banned across the main sector was liberalised so Chinese tycoons and foreigners gaming floors. (chiefly Americans) could build lavish casinos. Theanti-corruption drive has only ramped up since, as In 1999, total gaming revenue was $1.6bn. By 2006, officials involved in illegal gaming were made public and it had surpassed LasVegas, making Macau the world’s prostitution rings were broken up. undisputed gaming hub. By 2013, Macau gaming was “The industryhas had at least12-15 months of just bringing in $45bn, afigure seven times thatofVegas, constant negative policies,”Lawrence Ho,Melco Crown and the government was taxing the revenue at more than chiefexecutive, told investors in August. “I do think that 35 per cent. VIP,structurally,will never be whatitonce was.” But the growth was lopsided. As a2008 academic Reports of the firstjunket closures early in 2014 sent study concluded, the “moststriking feature of the Macau shockwaves through the industry. In the previous eight economyisthatitisnot just heavily dependent on a years, the number of registered junketshad ballooned single industry(gaming) but also on asingle source of from 76 to 235. Last year,more than afifthpulled out. players (mainland China) and asingle segment of the “Consolidation”isthe term used by analysts but in

34 |ft.com/wealth mages yi ett ;g alamy y/ ibrar el ur ct Pi ay id ;N rg be om lo :b to 2. Pho “The days of 90%of profiTscomingfrom2% of punTersare gone”

“We’rebecoming more self-reliant because the junketsjustcan’t pick up the slack at this point,”Robert Goldstein, president and chiefoperating officer of Las Vegas Sands, told investors in July.“Ihope the junkets resurrectbut right now it doesn’t look promising. But whatishappening is amassmarket is emerging.” 1. 3. Casinos are luring the masses by cutting minimum bet sizes, halving hotel rates and showcasing more Vegas- reality, the numbers are falling through attrition, not style entertainment. As the peninsula morphs from mergers. gambling haven to family-friendly entertainment zone, “A veryugly model is going to come to an end,”says manyanalysts are optimistic about Macau’slong-term Steve Vickers, arisk consultant and former head of the prospects in the newmodel. CLSA, an Asian brokerage, Royal Hong Kong Police force’s criminal intelligence notes Chinese tourism is expected to hit 200m by 2020, bureau. “The days of 90 per cent of your profits coming double the figure from 2013. from 2per cent of your punters are gone.” Under pressure from Beijing, the six big casino Funding is drying up. Thejunkets operatebyissuing operators are playing their part, spending billions of loans and recovering the cash within 15 days. But as dollars on newdevelopments in what’scalled the “build China’seconomyslows and the crackdown on graft it and theywill come” model. deepens, the averagerecoverytime is now twotothree By 2016, tourists will be eating baguettes at ahalf-size months, analysts say. Eiffel Tower,taking pictures from the world’s firstfigure- It has now become routine for the junketstomiss of-eight Ferris wheel and standing in aweofgondolas thecontractual minimums theyhaveinthe VIP rooms, 4. shaped likesmoke-breathing dragons. Thefollowing but competition is slowing and the casinos cannot fill year,the world’s longestbridgeisexpected to offer aroad the tables either,sothere have been fewconsequences. 1. link from Hong Kong airport. acroupier arranges “Wedon’t ask them to go,” says one casino executive. cards on abaccarat But the more family-friendly Macau will find it “Itwould be unwise because we don’t have any table inside the difficult to generatethe same levels of profits. replacement.” broadway macau Daiwa’sSoo says small-time spenders mean more pain More closures are expected. In early August, Beijing casino for the former European colony. “How much headcount devalued China’scurrencynearly 3per cent, making 2. do you need, betting HK$300, to offsetone HK$1m gambling in macau in Macau more expensive for mainland tourists. Within the 1880s payer from the equation? Howmanyhotel rooms do you another twoweeks, the Shanghai Composite fell by a 3. need for each of these HK$300 players to come in?” He fifth and China’scentral bank stepped up its efforts Xi Jinping, president thinks for amoment. “The maths doesn’t makesense.” to clamp down on moneylaundering. Daiwa, which of china Aaron Fischer,ananalyst at CLSA,concedes getting 4. forecasts thatyear-on-year VIP gaming revenue will Jamespacker, back to the high-growth spurtyears is fanciful. But it fall 41 per cent, following an 11 per cent decline in 2014, australian casino doesn’t matter.“Nobody wasforecasting the growth estimates thatnine junketsleftthe business in August magnate years, theywere justicing on the cake,”hesays. “We alone. aren’t going back to those levels.” W

ft.com/wealth|35

equities matthewvincent

@MPJVincent

how(not) to rePort acrisis

ow to write anewsstory 6 Incite panic. Or reportitasfact, about asell-offinequities, as in: “China’s ‘Black Monday’:panic following fears over grips global financial markets as stocks economic growth in China: undergo ‘bloodbath’ of selling.”Don’t Han eight-point guide, with quote acalmwealth manager, like Didier real examples from newspapers. RabattuatLombard Odier: “I think thatworries overafull-scale financial 1 Don’t call it “a sell-off”.Fartoo implosion in China are overdone.The matter-of-fact. And factual. Even Chinesegovernmenthas significant if marketsdon’t fall by the 10 per resources…toboostthe economy.” cent required for a“correction”, and later recover,there are loads of more 7 Create asense of doom. Suggest the dramatic but unquantifiable terms: worstcase might only be days away,as “rout”, “dive”,“plunge”. in one paper’s near perfect: “Doomsday clock for global market crash strikes 2 Usethe scariestnumber. £74bnisa one minute to midnight as central lot scarier than -4.67 percent. So go with banks lose control.”Don’t letawealth the amount temporarilywiped offFTSE manager likeTom Becket of Psigma 100companies’market values, rather Investment Management critique you: than the one-daypercentagechange. Keep calm:asell-off “We’redoomed. Or are we?There has in equitieswould not SuggeSt tHe Don’t make the same mistakeasDr been increasingly hysterical hyperbole be abig deal if the worStcaSe Evil in the AustinPowers spy films, and newspapersdid not across the western media about how use ananachronistic denomination:“A sayso migHtonlybe China is blowing up... From agrowth ransom of one millionpounds!”Dowhat perspective, we are still of the ‘steady onenewspaper didand estimate the fall dayS away but unspectacular’mindset.” in companies’ market capitalisations around the world: “Trillions wiped off Ford —you can have anycolour you 8 Equivocate subtly. Slip the markets.”Much better.Ignore wealth likeaslong as it’s black. Hence Black conditional tense into your scary managers like Mouhammed Choukeir Thursday1929, Black Friday1987, historic black plunging, justto at KleinwortBenson puttingthat4.67 Black Wednesday1992,and Black cover yourself.Better still, quote a per cent one-dayfallincontext: “Whilst Monday2015. Combinepoints one to former US TreasurySecretarydoing uncomfortable, [it] is ‘normal’for four and you getthis example from a it: “@LHSummers we could be in the equitymarkets, butprobably feelsmore UK newspaper: “Black Monday: FTSE early stageofaveryserious situation.” abnormalgiven the low volatilityof closes with £74bn wiped offmarket cap Or (ab)use “risk” as averb: “Black recent years.” in worstfinancial plungesince 2008.” Mondayrisks anew financial crisis.” Textbook. Don’t quote awealth manager,like 3 Make it an historic. If portfolio Didier Saint-Georges at Carmignac, managers now hold 5.5 per cent in 5 Convey aphysical impact. Asell-off actually quantifying the risk and cash, you can write: “Professional —sorry, plunge—might only manifest offering practical advice: “China investors raise cash holdings to highest itself in lots of red numbers on ascreen continues its effortstorebalance level since financial crisis.”Itdoesn’t (confusingly,green numbers in China), towards services without killing off matter thatthe increase was only 0.6 but you can makeitfeelcataclysmic: its economy. It can still pull this off, percentagepoints, or the crisis only “The China slowdown has sent shock but the consequence of failure would seven years ago. waves through commoditymarkets.” be considerable. If you believe there’s

Better still, mix metaphors and puns: an 80 per cent probabilityyour flight cK 4 Prefixthe daywithanadjective. “Dominoes begin to fall… the famed won’t crash, would you still feel to Standard practice. Political journalists Brics… are in disarray.” Don’t quote comfortable getting on the plane?

have long had their “Wobbly wealth managers likeMarc Hendriks Whatmatters is whatisatstake, not ejmm/is Wednesdays” and “Super Tuesdays”.In of Sandaire Investment Office, saying, justthe probability! Consequence: at :m

financial journalism, though, it must “The economic consequences from the hedgeyour risks, and hedgethem to be acolour and —toparaphrase Henry Chinese equitymarket falls are limited.” beyond China.” W Pho

38 |ft.com/wealth

familyoffice jeremyhazlehurst

@JHazlehurst

reachfor theskies

big misconception is that involves dealing with abstractions family offices are only such as “culture”,“ethos”,“values” and about wealth preservation. “purpose”. Obviously,thatmatters. But Whatdoes this mean, practically? Aafamily office ought to be, One answer comes from Emily and can be, much more than that. Griffiths-Hamilton, whose grandfather Thefamilyoffice needs to evolve. made his fortune in tinned dog-food It should not simply be awealth and whose parents ranamediaand management option for when a sports empire. She now advises families certain level of wealth is attained, but, and has written abook called Build taking apageout of Google’s Alphabet Your Family Bank, in which she argues playbook, should be seen as an that“afamily’s wealth is not limited umbrella organisation, harnessing the to its financial assets, but includes skills of manydifferent strategies and its arguably mostimportant forms individuals under the same roof. of wealth: its human and intellectual At present, there are three main assets”. types, which often correspond to a Wealth is not justabout money, and certain stageinthe evolutionofa so it follows thatafamily office has to business family.Anadviserwith more deal with more than justmoney. It has than 30 years’ experience of working to help afamily realise its values and so with wealthyfamilies all over the world it has to evolve into whatyou might call recently told me thatatthe firststage, the “full-spectrum”model. when afamily still has asuccessful At this stageafamily office has companythatmakes alot of money, a to become something complexand family office is a“side-effect” of the core subtle, amixture of venture capitalist, business. wealth manager and foundation. Itsfunction is to investmoney made It might help the family investin by the original business in order to AfAmilyoffice Up:Google’s latest sectors it understands, as well as help diversifythe family’s assets. In many project is to use the younger generation hone their emerging markets, countryrisk is abig balloons to form entrepreneurial skills. must be Amixture one large global problem, so moving some of the money of venture communications This is the newfamilyoffice. While out is sensible. network Alphabet, Google’s newdiversified Once the original business is sold, cApitAlist And tech holding company, will allow its however,the family office becomes founders to step back from the day-to- a“parking lot”for the money, in the weAlth mAnAger dayrunning of the search engine, it will words of one adviser.Its aim is to also see them develop their ideas and preserve wealth and the family’s job projects in drones, biotech, broadband- becomes managing money. business members. “Selling my broadcasting balloons and other This creates problems. Forastart, operating businesses was the biggest “moonshot”ideas. the skills thathelped them create mistakeIhavemade,”said one. True, fewshare LarryPageand asuccessful business are not the “Weare industrialists: my father and Sergey Brin’s passion for wild ideas, same skills needed to manageahuge his brother created our family business, tolerance of failure, or indeed wealth, portfolio. Some tryand, generally,do but we have shifted too much into but the idea of abroad church is one badly.Othersoutsource the job and finance. That was our big mistake... thatappeals. find themselves with nothing todo We thought business would be aheavy Thefamilyoffice needs to step out themselves. burden for the next generation and that from its traditional role and embrace That people often regretbecoming finance would be easier,” said another. the evolving demands and needs of a“financial family”was made clear So whatcomes next is soul- some of the world’s richestfamilies. W in research published by advisory searching; family members must ooGle :G

companyWithers lastyear,which work out whattheir moneyisfor and Jeremy Hazlehurst is founder of to included interviews with family who theywant to be. That is hard and Business Family Pho

40 |ft.com/wealth

family business suCCessiOnPlans

carrying thebaton

By Andrerhoden-PAul third feel theydisplayactive ownership anyfamily-owned compared with 94 per cent of family companies mayhave members at work in the business. survived the global financial But it can work. FT Wealth takes Mcrisis, but business experts alook at three success stories from identifysuccession as the biggest threat around the world. to their existence. Only 30 per cent of family businesses survive to their third generation, according to arecent By FeArguso’sullivAn reportfrom McKinsey, the consultancy. or Janine Diagou, moving into As well as determining which of their the family business in 1999 family should run the company, owners actually meant taking astep are increasingly thinking about the Fdown the hierarchy. Nowdeputy values theywant their successor to director at NSIA,the IvoryCoast uphold. Banking and Insurance group founded Family-controlled companies in 1995 by her father Jean Kacou comprise 19 per cent of the world’s Diagou, now the group’s president. largestgroups. Fast-growing markets Diagou, 41, gave up atop position at are settoincrease this share to more Citibank MobilCItofill therelatively than half of Fortune Global 500 modestrole of NSIA’s internal audit 1. companies by 2025. officer. Peter Englisch, global leader of EY “I joined at alower position because Family Business Centre of Excellence, insurance was anew business for me “I GREW UP WITH which specialises in helping businesses and Ineeded to learn the basics,”she plan succession, says the process can be says. THAT IDEA OF MY “extremely challenging”. Part of her reason for joining the PARENTSBEING LIKE “Tomanagethe business and family family company, she says, was simply dynamics requires special skills and “to learn anew job”. PRIESTSOFTHE talents. This is whysuccession planning Diagou’sfamily connection to the is so complex,”hesays. group’s president inevitably provided FAMILY BUSINESS” Englisch says the dynastic aspirations awall of scepticism to dismantle. Her of the next generation of European success in doing so, she says, is partly a family companies have lessened over victoryfor women. than [whatweshould do]. Even his the pastfew years, leading many “Convincing men in industryofyour grandchildren, call him ‘Grandpa owners to sell. competence is not simple in Africa,”she president’. Forall of us it is akind of But even for leaders of the growing says. “The main challengewas to prove respect.” number of family businesses in again and again thatIwas capable of But to succeed, everygeneration emerging marketsintheir firstand doing the job at leastatthe same level needs to forgetheir own identity; second generations, succession as men —and even better. Diagou says her name was a“major planning remains one the biggest “Itwas not easy but Ifound my way handicap”. challenges, Englisch says. “If ahead with alot of work, efficiencyin “You always walk in the shadow of the current strong generation of the job and much rigour.” your father,” she adds. family owners fails in successfully On top of that, she adds, “you “The other challengewas mainly transitioning the business for the next have to be smartaswell to gain their to be arole model for the younger generation, it might have amassive confidence”. generation, to boostthem to work impactonmanycountries in Asia.” Smartornot,everyson or daughter hard and achieve their dream. This According to McKinsey, two-thirds of asuccessful entrepreneur stands seems to me much more important of the next generation are willing to in the shade of their parent’s success. than promoting only gender.Today, takeonmore responsibilityinrunning Diagou was no different. She calls her NSIA has reached averygood level of the family business, yetonly 30 per father “MrPresident”. development but there is still alot to cent feel confident to do so. And only a “Calling him this is more ahabit do. This year,weare celebrating our

42 |ft.COm/wealth ger eiDin eh ri n-ma ea :J to 2. Pho

20th anniversaryand I’mreally proud 1. MBAatLoyola Marymount University succeed the family business,”hesays. to sayI’vebeen partofthis success.” Koji endo,third in LosAngeles, Endo joined the group “I grewupwiththatidea of my father generation chief in 1980, succeeding as chiefexecutive being my mentor and my parents being executiveofKai group in Japan on the death of his father in 1989. likepriests of the family business.” By MAnishA JhA 2. Twenty-six years on, he says his Though Endo is gearing up to pass oji Endo is the third generation Janine Diagou, deputy biggest achievement has been to on the baton at Kai Group to his son, chiefexecutive of Kai group, director at nSia,the expand the company’smain focus from Hiroaki, he has strong beliefs on what the Japanese cutlery, razor and ivorycoast banking Japan to marketsworldwide such as constitutes real leadership in afamily- and insurance goup Kfolding knife companyfounded India, China and the US. run business. by his grandfather in 1908. Risk management has been critical, “When afamily member is not Under Endo’s leadership, Kai group he says. “Itisimportant to not takeon humble and is arrogant and takes his lastyear became the firstJapanese too much risk and focus instead on the entitlement for granted, thatisthe winner of the Leonardo da Vinci core business and core competence of beginning of atragedy,” he says. “The prize, an international award given to the organisation. My management style next generation has to have asense of family businesses for demonstrating is to always ask myself am Idoing the responsibilityand humbleness.” an exceptional capacitytopass down right thing or am Igoing too far?” Respecting cultural differences is knowledgeand values. Lessons learnt from watching his also important, Endo says, something After graduating from Waseda father and grandfather at work proved he learned from his MBA. UniversityinTokyo and completing his invaluable. “Itwas my destinyto “The top challengefor me is how ➤

ft.COm/wealth|43 “OFALL THEPLACES IHAVEWORKED, IENJOY WORKING AT CINEPOLIS THEMOST”

to localise the management of our companyoperations abroad while sustaining the Japanese management style in spirit.” Endo turns 60 this year and now feels ready to shiftgears. “The CEO has to be active and forward-thinking and be at the customer’s service but I am getting old now and not as nimble as before. It is time for me to retire as CEO.” But despite his desire to makeroom for the next generation, Endo stresses this is not the end. “After Iretire from Kai Group, Iplantoopen up anew business which has nothing to do with Kai,”hesays.

By MAnishA JhA espite being an avid globetrotter all his life, it is behind the corner office desk Dof the Cinepolis headquarters in Mexico thatthe 42-year-old chief executive Alejandro Ramirez feels most at home. With degrees from Harvard and Oxford University, followed by an MBAfrom Harvard Business School and stints at the World Bank, the Mexico government, the OECD and the UNDP,Ramirez took over his family’s multiplexand movie entertainment business in 2004. philanthropy has also influenced alejandroramirez: Ramirez credits his father with “Of all the places Ihaveworked, I Ramirez’sleadership.“Knowing thatwe chiefexecutiveof instilling in him awork ethic and enjoy working at Cinepolis the most,” employ 28,000 people in 12 countries, cinepolis in mexico discipline and the need always to he says. “Being born in afamily that manyofwhom are youngsters who takeaccount of the long-term care of was always into movie theatres, Igrew are able to finance theirytoc wa ollege employees. up watching films in acineplexthat using ourflexible work schedules is a “Heisabig believer in the power of was right behind my house. This love rewarding thought for me.” formal education and enrolled himself for movies continues to remain closest He can point to manysuccesses, but for an executive MBAatHarvard eS

to my heart.” whatisitthatkeeps him up at night? Business School after he came to visit orr Ramirez sees his biggest “I believe thatmoviesare an me once on campus.” nt contribution to the family business important cultural expression which Ramirez is keen to stress thatfamily qui as the consolidation of the company’s can also be used to educate and raise businesses should not be complacent ro ar involvement in the Mexican home awareness about different issues. and mustcreate aculture of good om

market and beginning its expansion But the challengeistokeep the corporatepractice. nD

into newmarketsincluding further movie-going business relevant and “There should be clear rules of na into Northand South America as well appealing in the face of home theatre the game in terms of family versus er :F

as India. entertainment technology, streaming non-family employees,”hesays, “and to Combining business with services and video and internetpiracy.” everyone should know it.” W Pho

44 |ft.COm/wealth

46 |ft.com/wealth philanthropy aleXanDremarS

BY HUGOGreenHalGH pHOtOGrapH BY pascal pericH charityapp on an epic scale

lexandre Mars does not everything and gain an experience with access in averybusiness-driven way”. speak, as much as fire. this. [Epic] understands this need, as Critical to all this, Mars stresses, Rat-a-tat-tatcome the we live in this world where everything is the factthatEpicisnot in anyway words; rat-a-tat-tatcome is accessible and trackable. At Epic, we funded from donations. He foots a the ideas. All delivered in are trying to pull thattriggerand help thebill alone, ensuring all funds acuriously mangled Franco-American the newgeneration to give.” are directed to the chosen charities. accent thatboth belies his roots and Thefoundation grewout of afour- “Wedon’t have abusiness model,”he traces his rather peripatetic global year market research projectdesigned almostyells down the phone when I lifestyle. to find the 20 organisations making the ask him if and when the charitywould Hisphilosophyisembodied by is mostimpactinthe fields of child and become self-funding. “[Funding] will his aptly named (given the scale of his youth giving each year. always come from me; Iwillalso cover ambition) Epic Foundation, which So far Mars and his 15-strong team, the operating costs; thatwill be my aims to create tools to help people give with offices in NewYork, Bangkok and donation.” to charities dedicated to children and London (with three more planned in Running the operation cost$1.5m young people up to the ageof24. San Francisco, Mumbai and Sao Paolo), in 2014.Mars fully expectsthatto “A lot more people are giving,”hesays have sifted through 1,400 applications. increase, given the plan to extend the over the phone from his home in New Firsttheywere whittled down to 200, number of offices and eonmtak ore York, our conversation peppered with then further to 50, at which point staff. But covering the costs was always the ubiquitous police sirens and car his plan, he says. “Wehaveapure horns. “If you ask 200 people whether model in which 100 per cent [of your theygavelastyear,mostwill answer “Funding will donation] will go to the organisation yes. But if you ask them whether they always come thatyou select. have given enough, mostwill answer, “Weare anon-profit start-up with no no, even iftheyhavethe desire to give From me;iwill business model.” more.” also coverthe He certainly has enough funds to These budding better philanthropists cover the costs for quite awhile, having listthree main obstacles, Mars operatingcosts; founded and sold Phonevalley, amobile explains. First, theydon’t have the marketing agency, to Publicis Groupe, time. Second, theysimply don’t have that will be my the French advertising company, in the cash. And third, justasimportantly donation” 2007,and ScrOOn, asocial media theydon’t trustthe charity. management system, to BlackBerryin By trust, he means that, in many 2013. He spends 80 per cent of his time cases, donors are not able truly to Mars and his team headed to the running Epic; the other managing his track or monitor how their donations airport. investments through his own family are being spent. “Manycharities will “Wevisited the 50 finalists in the last office. declare, ‘If you care about this cause, stageofour process,”hesays. Making moneyatanearly agegives then we are the one charityyou should “Wespent twomonths on visits to you adifferent perspective, he says. trust’,” he says, “but we won’t be able 11 countries on five continents, so as “When you makeyour moneyunder 45 to give you atracking tool; you’ll have to have adirectconnection with the or 50 [Mars is 39], you still have 20 or to trustusand then we’llgive you a organisations.” 30 years ahead. It gives this generation brochure each year and invite you to Thefinal 20, which were announced of donors averydifferent perspective.” our gala.” in the firstweek of September,will be Theold truism that“moneymakes Thenature of philanthropy is used to reel in three newcategories money” does come into effect, Mars changing, Mars argues, and with it the of philanthropists: the entrepreneurs says, which again puts the emphasis on type of people who are coming forward (or their family offices, privatebanks the obligation to give. to give. Thejob now,headds, is for the or wealth managers); the “voices” (the “Itreally is about thinking: ‘What charities themselves to come to terms athletes and actors with moneyand legacydoyou want to leave?’”hesays. with this factand starttoexploit the influence and millions of social media “AtEpicFoundation, we want to opportunities this throws up. followers); and the corporations that help people find better ways to use “This generation is constantly using are seeking to investmoreincorporate their skills, resources and networks newtools,”hesays. “Wecan track and social responsibilityand “who want to give more.” W

ft.com/wealth|47 planning thewealthy on trial

BY emma BoYde

reputationsatstake

nder the Universal financial incentives to both prosecutors Declaration of Human and courts to go after the verywealthy. Rights we are all supposed Prosecutors are now empowered to to be equal before the law. train and employ their own accredited U Thedeclaration, adopted financial investigators, Rose explains, by awar-wounded United Nations and allowed to keep substantial General Assembly in 1948, attempted proportions of the sums confiscated for to enshrine everything thatthe Allies their own funds. “Weare now seeing had been fighting for.Its Article 7 aclear tendencyfor some prosecuting spells out thatnot only are we equal agencies to size up asuspect’sassets at in the eyes of the law, but thatwe the investigative stage,”hesays. should also have protection againstany But worstofall for the prominent discrimination thatcould infringeupon individuals thatRose represents is the thatright. intense media interestintheir lives. Thetrouble is, some say, thatin “The really devastating factor is today’sworld of online lynch mobs the amount and type of reporting,” those rights have been eroded and that he says, adding thatwhile normally wealthyand high-profile individuals, such attention is focused on crimes in particular,can sometimes be in for a such as terrorism or child abuse, many nasty surprise. lawyers already believe this media- Ben Rose, acriminal defence lawyer feeding frenzy has contributed to past at Hickman Rose in London, says miscarriages of justice in the UK,such the shock can be particularly acute in as the series of wrongly convicted Irish the UK.Tobeginwith, he says, some defendants in the 1980s at the height of clients who feel theydeserve better abombing campaign conducted by the treatment by the lawbecause of their Irish Republican Army. position in society will fastrealise that “But the wealthymay now suffer the country’straditional cultureof similar attention,”Rose argues, “which deference has been eroded. Iamsureplaces pressure on the Rose’s clients have included Tulisa judgeand the jurytoreturn averdict Contostavlos, the singer and former perceived as socially acceptable.” X-Factor judgewho lastyear was David Engel, amedia lawyer and acquitted of being concerned in the partner at the lawfirm Addleshaw supplying of aclass Adrug; Hans Goddard, says that, on the whole, high- Rausing, heir to the fortune derived profile defendants do still seem to geta from the TetraPak packaging empire fair trial. He says problems arise when, for whom Rose acted in connection for example, ahigh-profile defendant is with his arrestfollowing the death charged and prosecuted but ultimately of his wife, EvaRausing, over which acquitted after months of negative he was given asuspended sentence publicity. “While the legal theoryisthat in July 2012after being convicted of he leaves courtwithout astain on his preventing her lawful burial; and the character,the practical realityisthat artistDavid Hockney, for whom Rose he will have suffered hugedamageto acted in the inquestinto the death of his reputation and it is difficult to see his assistant Dominic Elliott. how anyone can ever fully recover from There are newfactors, he says, that that,”Engel says. leave wealthyorprominent individuals Wealthywhite collar criminals are at adisadvantage. Forexample, he also in for harsh sentencing. Engel continues, there has been arise in points to the recent heftysentences the UK of assetconfiscation powers handed down by UK courts to those in thathavehad theeffectofproviding the finance industry.

48 |ft.com/wealth 3.

2.

1. 1. kwekuadoboli, rogue “peopleof uBs trader,was sentenced to seven modest means yearsfor fraud by don’twant to go abuse of position 2. to prison either” tulisa Contostavlos wasacquittedof being concerned in the supplying of a class adrug 3. the knightsbridge TomHayes, aformer star trader at house of evarausing, UBS and Citigroup, was sentenced to whose husband, Hans rausing, wasgiven a 14 years in Augustfor conspiring to suspended sentence manipulate Libor rates. Earlier this afterbeing convicted year,Magnus Peterson, the founder in July 2012 of of collapsed hedgefund Weavering preventing her lawful burial Capital, was given a13-year sentence for perpetrating a$530m fraud, while UBS rogue trader Kweku Adoboli received seven years in 2012. Notall lawyers agree thatthe rights of the defendant, and particularly the wealthydefendant,are being eroded, however.Former director of public prosecutions, Lord Macdonald QC, now at Matrix Chambers, has aunique perspective. “I never felt as DPP thatwewere enjoying anyadvantageinprosecuting verywealthypeople,”hesays. “In fact, quite the opposite, because theycan afford the mostexpensive representation and thatgives them a real head startinacriminal trial. “People of modestmeans don’t want to go to prison or to lose their possessions either and it hurts them and their families justasmuch,” he says. However,StuartLeach, managing director of crisis and litigation at Bell

maGes Pottinger,the public relations firm,

yi believes circumstances can rapidly turn againstawealthyindividual when Gett

y; theyenter the legal process. “High net-worth individuals are always under public scrutiny. Just because you’re rich

Harlie BiBB doesn’t mean you can’t be wronged.” “The media has such apowerful grip s: C

to on public sentiment thatwevergeon trial by stereotype,”adds Rose. W pHo

ft.com/wealth|49 correspondent henryfoy

@HenryJFoy

poland’s empire builder

an Kulczyk’sfuneral wasbilled Then, armed with the lucrative as aprivateevent, but thatwould proceeds, he remodelled himself as a not have been apparent from the global investor,becoming the country’s long listofformer presidents, mostwell-known businessman and Jpoliticians and business leaders demonstrating to his peers thatcapital who packed into the Poznan church did not only have to flow from westto to paytheir respects to Poland’s most east. And even in death at 65, following prominent businessman. aroutine medical operation in Entrepreneur,investor, Vienna, Kulczyk’sseemingly well-laid philanthropistand the country’srichest succession plan for his empire, through man when he died in July,Kulczyk his 34-year-old son, tackled apressing was Poland’s pre-eminent capitalist, a challengethatlooms largefor many man whose career charted much of the business empires built in the post- country’sremarkable 26-year journey communistera. from post-Sovietchaos to the EU’s Much likeHenryFord or Steve Jobs, fastest-growing economy. Kulczyk senior is already being written Abold, opportunistic businessman into historyassomeone who played a who made his fortune buying and selling role larger than his business and made statecompanies in the tumultuous amarkonPolish society at large. early years of the Polish republic, his “All those who are alive today role in the country’stransformation follow in his footsteps,”wrote made him, to manybusinessmen, as BoguslawChrabota, editor-in-chiefof much of astatesman as Lech Walesa, Rzeczpospolita, aleading Polish daily, former Solidarityleaderand president, following his death. or Aleksander Kwasniewski, another But to others he was simply a former president, both of whom creature of his time. If he had not made attended his funeral. billions from buying up inefficient and But likemanyofthose in eastern poorly managed state-run assets and Europe who emerged from the then selling them on to investors eager turbulent post-communistyears with for aslice of anew emerging market, their bank accounts flush with cash, someone else would have. Kulczyk was doggedbysuggestions of Kulczyk, who was asuccessful sleaze and corruption and allegations businessman before the fall of the of all-too-friendly relationships with Berlin Wall as the sole Polish importer politicians both before and after 1989. and dealer of Volkswagen cars, built an This, too, made him an integral partof empire thatspanned across telecoms, the Polish transition story. insurance, automobiles and petroleum, “With its lights and shadows, its almostall of them bought from the undisputed successes but also its post-communiststate. So much so that shortcomings and errors… Kulczyk was at the time of his death, his reputation an active participant in this transition, was difficult to separatefrom thatof even its symbol,”wrote Miłosz the country’sfinancial evolutionthat Weglewski in Newsweek magazine made him worth $4bn, according to after Kulczyk’sdeath. Forbes magazine. In his early business career,Kulczyk Those who cheered the sales led, and ultimately became the main of state-owned enterprises and proponent of,the privatisation and economic overhaul heralded Kulczyk financial reform drivetu tha nleashed as avisionary. Those who remained Poland’s economic boom and today suspicious of the speed and depth of brings in billions of dollars of foreign the fiscal reforms criticised him asa investment to the countryevery year. corrupt financial alchemist.

50 |ft.com/wealth he demonstrated to hispeersthat capitaldid not only have to omberG

lo flow from west ;b es to east aG im ty et /G aFp s:

3. oto ph

But even then,asheturnedaway 1. from his countryofbirth, moving to spend more time in London and selling down his Polish assets, Kulczyk again found himself leading the way. Hisinvestments in African energy and mining ventures total more than $1bn and his 3per cent stakeinglobal brewer SABMiller is worth about $2.5bn. As leading Polish companies such as KGHM and Grupa Azotybegin to taketentative steps outside Poland through purchases of overseas companies, theyare in partfollowing his lead. “How much personal courageand determination it required to compete with global giants,”wrote Chrabota. “But he was not afraid. He took the gloves and won. Also for Poland.” 2. But perhaps Kulczyk’smost important contribution to the Polish business storyisinhis prescient Some sawKulczyk as leeching on the 1. succession planning, which sawhis state: buying assets from the taxpayer Jan Kulczyk son Sebastian takechargeofthe family and selling them to the highestprivate 2. business in 2013. bidder for ahealthy profit. Others pKn orlen, the oil Across Poland, and the restof companyinwhich noted his close relationship with Kulczykhad shares the former SovietBloc countries politicians —Kwasniewski sits on his 3. thatare now members of the EU, holding company’sadvisoryboard and lech Walesa,former contemporaries of Kulczyk senior who Kulczyk used to accompanyWalesa on solidarity leader bought, borrowed or bettheir wayto overseas trips. billions acquiring former state-owned Those critics felt vindicated when businesses in the privatisation boom Kulczyk became embroiled in ascandal following the collapse of the Iron involving allegations of improper Curtain now find themselves heading government influence over PKN Orlen, into retirement without aplan in place. Poland’s largestoil company. Unlikebusinesses in the west, where Kulczyk, then an Orlen shareholder, succession is akey partoffuture was accused of attending asecret planning, manyeastern European meeting with former KGBspy Vladimir businesses thatwere formed in the Alganov,then representing the Russian early 1990s have been run by the same energyindustry. people since and as such have no Hauled before aparliamentary experience in handling management commission investigating the transition, or consider it an important company’sgovernmental dealings, issue to plan ahead for. Kulczyk denied wrongdoing. But If the shifttoKulczyk’sson proves a the resulting controversy sullied his success in the coming years, his father’s reputation in Poland and precipitated legacyasboth ashrewd investor and a ashiftinhis attention, and business forward-thinking manager will appear dealings, overseas. far harder to challenge. W

ft.com/wealth|51 philanthropy outsourcing

BY SarahMurraY

No NEED to Go It AloNE

1. MY lA /A lING oEth GB MAGEs; JoER YI GEtt s/ IoN Ct DU Ro AP JEtt s: to Pho

here is no app for it yet, but concept in the philanthropic world, up acompany, creating afoundation anyone wanting to setupa donors are recognising the benefits involves everything fromsetting privatefoundation can now of avoiding having to navigate the up alegal entitywith directors and hand over activities such as complexlegal, tax and accounting registering its charitable status to Tregistration and accounting requirements associated with establishing agovernance structure, to agrowing rangeofconsultants and establishing aprivatefoundation. opening abank account and making other third-party service providers. In the US,for example, Foundation provision for the investment of its Yetwhile outsourcing minimises Source, acompanythatprovides endowment. their bureaucratic burdens, donors philanthropic supportand “It’snot impossible but it has to be are increasingly seeking help with the administrative services, now has more done carefully and in the right way,” biggerquestion —how to maximise the than 1,200 institutions as clients. says RobertChartener,chiefexecutive impactoftheir money. Going it alone is certainly not for of Foundation Source. While outsourcing is arelatively new the faint-hearted. Rather likesetting Thecompanywas created to provide

52 |ft.com/wealth privaTe foundaTions Turn To Third parTiesToTap inTo invesTmenT experTise

comprehensive outsourcing services for can move it to adifferent manager,” 1. foundations. It even sets up corporate says Carson. “That’sawaytoget great Newprivate structures in advance so thatall it takes results, abroader diversification and foundations can now is aname changetocreate aprivate likely payasmaller fee.” be up and running in afew days by foundation for anew client. “Wecan However,managing its outsourcing several of have afoundation up and running in a administration, tax benefits and their services fewdays,”saysChartener. endowment investments is only asmall 2. By removing the need to hire lawyers, part of whataprivatefoundation does. Women in Mali winnowing grain. accountants and others, Foundation Most important, of course, is making several foundations Source also makes it possible for people well-considered grants thatcan have supporthumanitarian with relatively small amounts of money an impactonaproblem, whether and philanthropic to setupafoundation. “Westarta the founder’s focus is combating action in Africa largenumber of foundations everyyear poverty,curing disease or increasing with well under amillion dollars,”says biodiversity. Chartener. And, in developing their grant- Similarly,inthe UK,London-based making strategies, donors are also Prism offers back-office services to starting to seek outside support. individuals, families and institutions “Increasingly,there’s asense of 2. —usually giving £500,000 to £3m needing help in being smartabout ayear —who want help establishing philanthropy,” says Doug Balfour, and administering agrant-making chiefexecutive of Geneva Global, a services thatgobeyond tax and legal foundation. consulting companythatspecialises in consulting is likely to expand. Theadvantages of outsourcing international philanthropy. “There’s an interesting movement privatefoundation administration to a Thecompany’sclients, Balfour in the market that’spicking up quite third party go beyond tax and book- explains, are generally people who have significantly,which is people paying keeping. Nottobeunderestimated made their own moneyasinvestors, for supportaround insights so that is the abilitytoexplore issue areas businesspeople or entrepreneurs. “The theycan become experts,”saysJake and potential grantees anonymously, people looking for us have decided they Hayman, co-founder and chief without setting up expectations. “We want to takeasimilar approach to the executive of TheSocial Investment can go out and do informational one theyused to create their wealth,” Consultancy. interviews with potential grantees, he says. With offices in London, NewYork people in the community, elected Geneva Global therefore helps and Dubai, the consultancyprovides officials, corporateleaders and others foundations with everything from advisoryservices to individuals and thatafoundation might want to programme design and project foundations committing sums of partner with, without divulging who management to grant administration, between £250,000 and £25m. thatis,”saysEmmett Carson, chief monitoring and evaluation. Itsservices include “insight trips” on executive and president of the Silicon Thecompanyalso offers research which philanthropists spend time in a ValleyCommunityFoundation, services thathelp clients to discover local acommunity, attend workshops which offers customised philanthropy more about the social problems they and meetgovernment officials, business services. want their foundation to tackle and leaders, staffofnon-profit organisations Tapping into investment expertise is introduce them to newapproaches and others. “Whatwe’rerunning is another reason for privatefoundations to international development. This, essentially amini-MBAorPhD course to turn to third parties. SVCF,for says Balfour,isbecause founders in social change,”saysHayman. example, allows foundations to pool increasingly want to learn more about He believes thatifphilanthropists their endowment funds with the assets whattheyare doing. “Theyrecognise are to develop game-changing social handled by the communityfoundation’s thatsocial changeiscomplicated,”he innovations, theywill have to become dedicated team of investment says. far better informed and experienced managers. Given the growing appetite of than in the past. “Inorder to innovate Donors can choose from one of five philanthropists to understand you need to know whatyou’re doing,” investment options. “If theydon’t the complexities of social and he says. “Otherwise, it’s easy to waste a likethe performance over time, they environmental challenges, demand for lot of moneyquickly.” W

ft.com/wealth|53 book REVIEW RIch pEoplE pooR countRIEs

BY danielBen-ami evidence of popularprosperity

tishardtoimagine how the rapid of the changing composition of the development of manypoorer Forbes listofthe world’s billionaires. economies in recent decades From there she worked with an could have happened without the assistant, Sarah Oliver,toresearch emergence of super-rich individuals. everyindividual to determine how they No doubt for mostFinancial Times achieved their fortune and the sectors readers the twogotogether.The with which theyare associated. Irise of popular prosperitydepends On this basis, she determined that on the vibrancyofwealth-creating extreme wealth in emerging markets entrepreneurs. is largely self-made. Although some But it is important to remember that wealth is acquired by inheritance, its manypeople do not see it thatway.For importance is declining. Thetypical some critics, the existence of the super- emerging market billionaire builds a rich alongside manymillions in poverty globally competitive mega-company is immoral. Formanyothers, life is thatalso plays arole in transforming inevitably azero-sum game: more their home country. riches for the fewmust, by definition, There are, of course, variations mean less wealth for the many. by region and sector.EastAsia is, Rich People Poor Countriesshould not surprisingly,the mostdynamic. be understood againstthe backdrop Mainland China went from being of this debate. Caroline Freund, a unrepresented in 1996 to making up senior fellow at the Peterson Institute 40 per cent of eastAsian billionaires by for International Economics, a 2014.The Middle Eastwas exceptional Washington DC-based think-tank, in anegative sense, as the only region begins the book with an exchangethat where inherited wealth had increased. encapsulates the contrasting views. At Thesecond partofthe book argues the World Economic Forum in Davos strongly thatthe rising prosperity this year,Winnie Byanyima, executive of poorer countries has been closely director of Oxfam International, associated with the growth of large referred to the reliefcharity’sfindings companies. As countries have grown thatthe richest1per cent of the world’s richer,sohavecompanies and, in many population would own more than 50 cases, individual entrepreneurs. per cent of the world’s wealth by 2016. In 1996, fewer than 3per cent of In response, Sir Martin Sorrell, global Fortune 500 companies were chiefexecutive of WPP,the advertising from emerging markets. By 2014,the group, said: “I makenoapologyfor figure was nearly 30 per cent. These having started acompany30years ago largecompanies have played acentral mages yi with twopeople and having 179,000 role in generating employment and people in 111 countries and investing in exports for poorer countries. They have human capital each year to the tune of also helped economies shiftfrom an at least$12bn ayear.” emphasis on agriculture to industry

ThefirstpartofFreund’s work is and services. Of course, it is always oomberg; gett

essentially ataxonomyofthe super- possible some individuals will accrue s: bl rich in the emerging world. Herstudy’s greatwealth by corrupt means. For oto

starting point was an examination Freund, an important waytoguard ph

54 |ft.com/WEalth 4.

thebook showshow the developmentprocess Is closelyconnected to

1. therIseoflarge companIes

1. againstthis is to ensure companies shenzhen, china operateinacompetitive environment. 2. This includes making it easy for sorting plastic individuals to setupbusinesses and forrecycling in beijing maintaining an openness to trade. In 3. such conditions, she argues, it is harder camel trading in for powerful forces to hijack the wealth abu dhabi creation process for their own benefit. 4. Winnie byanyima, Although Rich People Poor Countries executive clearly shows how the development director of oxfam process is closely connected to the rise international of largecompanies, it is unlikely to convince sceptics. It is doubtful that those with amoral aversion to the accumulation of extremewealth will be convinced simply by facts. And those who believe development is tightly 3. constrained by scarce resources will continue to insistthatmorefor some mustnecessarily mean less for others. 2. Winning the debate on the benefits of popular prosperityrequires aculture war waged on several fronts. It means, among other things, showing through the force of argument thateveryone can benefit from awealthier society. It is also necessarytotackle the moral qualms about mass affluence. Thefight cannot be won with evidence alone. W

Rich People Poor Countries:The Rise of Emerging-Market Tycoonsand their Mega Firms, by Caroline Freund, assisted by Sarah Oliver (Peterson Institute for International Affairs, 2015); paperback $23.95, ebook $9.95

The reviewer is the author of Ferraris for All (Policy Press, 2012)

ft.com/WEalth|55 MAgEs yI h/gEtt EC MARK LE t; sPoR MPICs s: E to Pho

56 |ft.com/wealth investment passions football clubs

BY Madison Marriage

MIxEdfoRtunEsofthE gAME

ylove of Tottenham example, the collective pre-tax profits Hotspur,the north registered by Premier League clubs London football club were positive for the firsttime in 15 better known in our years, according to recent Deloitte Mhousehold as “The Mighty research. The consultancydescribed Spurs”,can only be described as the £187m of pre-tax profits, largely the irrational. result of lucrative broadcasting deals, Theteam is one of the most as a“landmark turning point”. exasperating in the UK Premier Yetitishard to feel confident about League, routinely throwing away two- investing in football. Several football- goal leads, seemingly firing talented focused funds have been launched, but managers on awhim and selling star none has been successful. Themost players in favour of questionable recent was co-launched in 2014 by replacements. TerryVenables, the former England Whyput up with such aclub? manager,which was targeting a12per Perhaps because one of my earliest cent annual return. Cavendish Asset memories is seeing the Spurs victory Management, the companyrunning bus when Tottenham won the FA Cup the fund from the Caribbean tax haven in 1991, the lasttime our players have of Anguilla, had its license revoked by lifted thattrophy. reasons, in the hope of being invited the local regulator justone month after My firsttrip to amatch at the to annual meetings or having asay in the fund opened to investors. White Hart Lane stadium was equally club strategyand potentially making a Theshare price performance of the memorable: aged four,with my dad profit. None of the above happened. teams thatremain publicly traded is and about 35,000 other fans, we were When the club pulled out of Aim, also verymixed. Italian club Juventus, temporarily evacuated before the game small shareholders were presented with listed on the Borsa Italiana, has seen due to an IRA bomb scare. True to achoice of either selling their shares at its share price more than halve over form, we lostthe match, aLeague Cup alow price (40p each), or attempting the pastfive years to ¤0.27,while rival semi-final againstNottingham Forest, to sell their holdings at alater date team AS Roma’shas dropped by nearly by twogoals to one. through acomplicated trading athird to ¤0.65. Since then Ihavedeveloped a mechanism. By contrastthe share price of largenetwork of Spurs-supporting Small shareholders in manyother Germany’sBorussia Dortmund has friends, relatives and colleagues who Premiership sides have similarly seen nearly quadrupled to ¤4.06 over understand the highs and lows of their clubs exit the stock market in the same period, while Manchester backing such avolatile club. recent years, including Aston Villa United’s share price has risen by nearly Many spend hundreds, if not (2006), Charlton Athletic (2006) and athird to $18 since it listed on the New thousands, of pounds on ticketsto Newcastle United (2007), as well as York Stock Exchangein2012. games each year (season ticketscost Scottish club Rangers in April this year. Severalrenownedfund managers, up to £1,895), in the hope thatSpurs Darius McDermott, managing including Crispin Odey, the hedge will finally secure some silverware ora director of Chelsea Financial Services, fund mogul, and Nick Train, Finsbury Champion’s League place. the fund research company, believes Growth and Income Trustmanager, Their optimism about the club’s football enthusiasts should treat have taken big stakes in some of chances often borders on the investing in the industrywith extreme these teams, but McDermottremains delusional, but theybecome alot more caution. sceptical about the benefits. “Some rational when discussing its financial “Investment in sportispassion first, [football] stocks have had good position. profit later,” says the Chelsea FC fan. periods, but it is verycyclical,”hesays. TwoTottenham supporters admitted “You can makemoney, but fewdoit I’mtempted to agree. Being a theyboughtSpurs shares several years consistently and there have generally Spurs fan is stressful enough, without ago, but had their fingers burnt when been more losers than winners.” worrying about my team’s stock market the club delisted from the Alternative Yetthere are signs thatfootball performance as well. If Iamdrawn to Investment Market in 2012. They clubs are finally better managing their betonthe game, Iwill justspend the bought the shares for sentimental finances. In the 2013-14 season, for occasional £5 at Ladbrokes. W

ft.com/wealth|57 AMBITIOUS WEALTH STEPHENFOLEY

@StephenFoley

POWEREDBYDREAMS

property tycoonhas launched Relief, and Education for Alien Minors TheDream.US was founded by an ambitious —audacious, Act—the Dream Act—which would Graham in 2013, justashewas selling even —bid forthe White have put them on apathtocitizenship. the Post to Amazon founder Jeff House, threatening to deport TheDream Actfailed to pass Congress, Bezos, and it has won donations from Aundocumented immigrants but the name stuck. celebrities of philanthropy including Bill from the US if he gets thereand betting In 2012, President Barack Obama and MelindaGates and eBayfounder that calling Mexicans “rapists”might win used an executive order to grant Pierre Omidyar. himthe votes to do so. Dreamers two-year work permits, “Weset atarget of $25m, and bust As acause, throwing immigrants giving them, as he put it, ashot at straight through that,”saysGaby out of the countryisnot typical of the the American dream. In anation of Pacheco, the organisation’s programme billionaire set, but then Donald Trump immigrants, the idea is personal and director.“So then we said $50m — has always been in acategorytohimself. potent. and now we are at $91m.Now we are America’swealthiestcitizens are planning to offer 5,000 scholarships, of actually much more likely to give money up to $25,000 each.” to undocumented immigrants than to THEDREAM.USISA Theorganisation has quickly become give them grief. ago-to for wealthydonors. Penny One of the mostfashionable causes GO-TOFOR Pritzker,scion of the Hyatthotel currently is funding universitytuition WEALTHYDONORS dynasty and secretaryofcommerce for children who were brought to the US in the Obama administration, is one by their parents, but whose illegal status prominent supporter of the cause means theyare frozen out of the system Take Bill Ackman. Last year,two Hope: dreamers who is using her own foundation of federal grants and loans. These are hours into athree-hour presentation on can nowaspireto in Illinois. But others prefer to use the 2m youngsters collectively known as whyheisbetting Herbalife shares will something greater the infrastructure already being than amenialjob in “Dreamers”. fall to zero, the hedgefund manager the black economy built at TheDream.US.Zuckerberg, This cause, whose backers include began to talk about his family: his great- for example, donated $5m to the Don Graham, former owner of the grandfather,who came to the US from organisation with the stipulation thatit Washington Post,hedgefundmanager Russia in the 1880s and worked his way be spent in the San Francisco area. Bill Ackman and Mark Zuckerberg, up from nothing; and his father,the first As so often, the philanthropic co-founder of Facebook, is not on its Ackman to go to college, who was in the and the political are not so easy to face politically motivated —there are audience. tease apart. Dreamers, even college- humanitarian and economic reasons “I’mahugebeneficiaryofthis educated ones, are not going to get for wanting to supportthe education country,”hesaid, astonishing the the vote, but by helping them to of migrant children —but it has audience by choking up and wiping become biggercontributors to the potentially greatpolitical significance. away tears. US economythrough more lucrative It strengthens the case for immigration President Obama’saction jobs, sponsorship donors are adding reform thathas eluded Congress dramatically widened the work to the arguments for giving them a for decades, and when the Trump opportunities open to Dreamers, path to full citizenship. And each show finally ends, comprehensive who can now aspire to scholarship creates asa storytoryofan of an immigration reform will be nearer, something greater than a ambitious youngster achieving not further away,because of this menial job in the black acollegedegree and pursuing philanthropic movement. economy. Theexecutive the American dream, another Ah, Dreamers. It might be one order also eliminated little counter to the negative of the mostconsequential pieces of administrative hurdles stereotypes bandied about rebranding ever.These are children of to getting into college. by populistpugilists. illegal immigrants who, because of their However,Dreamers These factors will help undocumented status, could not geta remain locked out of shape the political debate. social securitynumber thatwould allow the federal system of Donations to TheDream. them to work legally.Inmanystates, grants and subsidised US and Trump’s poll numbers theycould not even getadriver’s licence. student loans, which have soared in tandem this :AP

Afew years agotheywere being called means the playing field is year,but Iknow which one will TO “illegals”.Then came the Development, still uneven. prove the more enduring. W PHO

58 |FT.COM/WEALTH