Best European Stock Bets

October Hedge Funds: Best, Worst, Biggest

Jonathan Herbert doesn’t share other investors’ deep anxiety about a recession in Europe.

One
of the region’s best-performing equity hedge fund managers this year,
the Swiss native runs the Camox fund, a value-driven long-short investor
based in London. Herbert’s fund buys lesser-known small- and mid-cap
European stocks that he believes are on the verge of faster earnings
growth because of a product break-through or a turnaround in their
business.

Leading performer Herbert has played a lot of small-cap European shares
to big gains this year while shorting giants Danone and Unilever. Photo: Chris Gloag for Barron’s

“Even
though Europe is mired in anemic growth, it really doesn’t matter
because our companies are innovating and actively selling their products
in China, Latin America, and the Middle East,” says Herbert, 42. “It’s
paradoxical that many of our companies are exhibiting organic growth
rates between 5% and 20%, when gross-domestic-product growth in Europe
is basically at zero.”

Herbert looks for companies that dominate
narrow global industries. Recent investments have included one in the
aluminum auto-engine-parts business and another in enterprise software
made specifically for banks. By his estimates—usually based on a
multiple of enterprise value divided by earnings before interest and
tax—his picks tend to trade at a 40% discount to their large-cap peers,
and their organic growth rate is four times as fast. He’s short a number
of big, household names.

The preference for small-caps has
evolved over time for Herbert, who was raised in the French-speaking
Swiss village of Cologny by an Israeli father and an American mother. He
first became interested in the group while working as a stockbroker at
Deutsche Bank and then at private bank Lombard Odier Darier Hentsch, in
Zurich. He realized risk-averse institutional investors weren’t fully
exploiting the opportunity.

“If you can capture that explosive
growth in terms of investing in the company at the right point in time,
and if the company is cheap enough that you have a margin of safety,
that is where the money is to be made,” says Herbert, who has a joint
master’s degree in economics and business administration from the
University of Lausanne.

His Camox fund (derived from the Latin
word for a breed of mountain goat native to the Swiss Alps) has posted
outstanding returns this year, rising 24.77% through Sept. 30, according
to fund tracker BarclayHedge. That is nearly six times the MSCI World
Index’s meager 4.33% return in the same period. Over three years, Camox
has returned 33.01% annualized, more than double the MSCI’s 16.80%
return.

The gains helped boost assets under management to $255
million (205 million euros) by early October, from just $7.6 million
when Herbert started with a single analyst in February 2008. Camox’s
management fee ranges from 1.5% to 1.7%, plus a performance fee of 17%
to 20%, depending on how long investors agree to lock up their money in
the fund. Minimum investment is $500,000.

“He does not fall in
love with stocks,” says Gilles Lambotte, a partner at Octogone Group, a
financial advisory in Geneva that has invested in Camox. “He gets in and
out with conviction.” In September, when euro-zone inflation fell to
its lowest level in five years, Herbert believed “the market was
slightly overvalued,” so he liquidated 25% of his portfolio. German
stocks fell by 16% in subsequent weeks, so Herbert used the cash he’d
raised to buy stocks.

Camox currently has 25 long positions and six shorts. Among the bullish bets are Software
(ticker: SOW.Germany). Herbert likes enterprise-software stocks because
the companies collect monthly “maintenance charges” from
customers—usually large companies that can’t risk a shutdown. In the
second quarter, Software suffered a surprising decline in sales at its
“middleware” unit, whose products tie together different databases.
Middleware, for instance, is what allows the computer systems of
law-enforcement agencies and airlines to work together to cross-check
passenger lists for terror suspects. The revenue shortfall caused the
stock to fall 33%.

But Herbert’s research found that the company
had lost a senior sales executive and spent a lot of time seeking
certification to work with the U.S. Defense Department, which hurt
European sales. He’s betting sales will rebound. Camox bought shares at
about €18 each, and by mid-November, the stock had risen to €21.50; he
has a target of €40 over two to three years.

Another favorite is Temenos Group
(TEMN.Switzerland) of Geneva, the largest producer of enterprise
software for banks outside of the U.S. As European banks regain their
footing—their solid scores on recent stress tests suggest as much—they
can again afford to upgrade their information-technology systems.
Foreseeing the banking rebound, Camox started buying the stock for about
16 Swiss francs ($16.64) in February 2012, right after it fell sharply.
Since then, Temenos has nearly tripled, recently trading at CHF33.40
($34.55); Herbert expects it to rise above CHF50.

By quizzing
European companies about their suppliers and competitors, Herbert
occasionally discovers companies scarcely covered by sell-side analysts.
One example is Montupet,
(MON.France), a manufacturer of aluminum components for car engines
that suffered in 2009 when General Motors went bankrupt and orders fell.
Herbert bought the stock in September 2013 for €22, anticipating a
recovery in U.S. auto sales and an increase in outsourcing by German car
makers. Backed by rising revenue and profits, the stock has nearly
tripled, to €64. It could top €100 in two or three years, he says.

Among Herbert’s six short positions are large-cap European consumer stocks, including yogurt maker Danone (BN.France), and food and home-products giant Unilever
(ULVR.UK). He thinks the shares of these dividend-paying, slow-growing
companies are overpriced—selling for more than 20 times
earnings—because European investors are scrambling for protection
against a recession.

Shorting large-caps raises cash for Herbert
to invest in smaller gems that are growing a lot faster. “As long as
Europe doesn’t slip into a prolonged recession, our companies will do
just fine—and prosper,” he says.

E-mail: editors@barrons.com





Best European Stock Bets

“It’s not personal...it’s strictly business.” Family firms: Business in the blood @TheEconomist

Family firms

Business in the blood

Companies controlled by founding families remain surprisingly important and look set to stay so

Nov 1st 2014 | NEW YORK| From the print edition

 

 

THE “Lucky Sperm Club”, as Warren Buffett likes to call it, is still
going strong in the commanding heights of business. On opposite sides of
the Atlantic, Ana Botín and Abigail Johnson have recently succeeded
their fathers in filling two of the most powerful jobs in finance, as
chairman of Banco Santander and chief executive of Fidelity Investments,
respectively.

Founding dynasties run, or wield significant clout at, some of the
world’s largest multinationals, from Walmart to Mars, Samsung to BMW.
Half a century ago management experts expected the hereditary principle
to fade fast, because of the greater ability of professionally-run
public firms to raise capital and attract top talent. In fact, family
firms have held their ground and, in recent years have increased their
presence among global businesses.


Family-controlled firms now make up 19% of the companies in the Fortune
Global 500, which tracks the world’s largest firms by sales. That is up
from 15% in 2005, according to new research by McKinsey, a consulting
firm (which defines such firms as ones whose founders or their families
have the biggest stake, of at least 18%, plus the power to appoint the
chief executive). Since 2008 sales by these firms have grown by 7% a
year, slightly ahead of the 6.2% a year by non-family firms in the list.
McKinsey sees these trends continuing for the foreseeable future.



Read the whole article online on The Economist website:  Family firms: Business in the blood | The Economist

#Greenspan: If #China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into #gold, the country’s currency could take on unexpected strength in today’s international financial system

In today's world of fiat currencies and floating exchange rates, a return to the gold standard seems to be nowhere on anybody’s horizon. Yet gold still has special properties that no other currency can claim-- which is why China is boosting its holdings..

---

September 29, 2014

SNAPSHOT

Golden Rule

Why Beijing Is Buying

Alan Greenspan
ALAN
GREENSPAN served as Chair of the U.S. Federal Reserve from 1987 to
2006. This essay is adapted from the paperback edition of his most
recent book, The Map and the Territory: Risk, Human Nature, and the Future of Forecasting [1] (Penguin Press, 2014). Copyright © Alan Greenspan, 2014. Reprinted by arrangement with the Penguin Press.If
China were to convert a relatively modest part of its $4 trillion
foreign exchange reserves into gold, the country’s currency could take
on unexpected strength in today’s international financial system. It
would be a gamble, of course, for China to use part of its reserves to
buy enough gold bullion to displace the United States from its position
as the world’s largest holder of monetary gold. (As of spring 2014, U.S.
holdings amounted to $328 billion.) But the penalty for being wrong, in
terms of lost interest and the cost of storage, would be modest. For
the rest of the world, gold prices would certainly rise, but only during
the period of accumulation. They would likely fall back once China
reached its goal.


The broader issue -- a return to the gold standard in any form -- is
nowhere on anybody’s horizon. It has few supporters in today’s virtually
universal embrace of fiat currencies and floating exchange rates. Yet
gold has special properties that no other currency, with the possible
exception of silver, can claim. For more than two millennia, gold has
had virtually unquestioned acceptance as payment. It has never required
the credit guarantee of a third party. No questions are raised when gold
or direct claims to gold are offered in payment of an obligation; it
was the only form of payment, for example, that exporters to Germany
would accept as World War II was drawing to a close. Today, the
acceptance of fiat money -- currency not backed by an asset of intrinsic
value -- rests on the credit guarantee of sovereign nations endowed
with effective taxing power, a guarantee that in crisis conditions has
not always matched the universal acceptability of gold.


If the dollar or any other fiat currency were universally acceptable
at all times, central banks would see no need to hold any gold. The fact
that they do indicates that such currencies are not a universal
substitute. Of the 30 advanced countries that report to the
International Monetary Fund, only four hold no gold as part of their
reserve balances. Indeed, at market prices, the gold held by the central
banks of developed economies was worth $762 billion as of December 31,
2013, comprising 10.3 percent of their overall reserve balances. (The
IMF held an additional $117 billion.) If, in the words of the British
economist John Maynard Keynes, gold were a “barbarous relic,” central
banks around the world would not have so much of an asset whose rate of
return, including storage costs, is negative.


There have been several cases where policymakers have contemplated
selling off gold bullion. In 1976, for example, I participated, as chair
of the Council of Economic Advisers, in a conversation in which then
U.S. Treasury Secretary William Simon and then Federal Reserve Board
Chair Arthur Burns met with President Gerald Ford to discuss Simon’s
recommendation that the United States sell its 275 million ounces of
gold and invest the proceeds in interest-earning assets. Whereas Simon,
following the economist Milton Friedman’s view at that time, argued that
gold no longer served any useful monetary purpose, Burns argued that
gold was the ultimate crisis backstop to the dollar. The two advocates
were unable to find common ground. In the end, Ford chose to do nothing.
And to this day, the U.S. gold hoard has changed little, amounting to
261 million ounces.


I confronted the issue again as Fed chair in the 1990s, following a
decline in the price of gold to under $300 an ounce. One of the periodic
meetings of the G-10 governors was dedicated to the issue of the
European members’ desire to pare their gold holdings. But they were
aware that in competing with each other to sell, they could drive the
price of gold down still further. They all agreed to an allocation
arrangement of who would sell how much and when. Washington abstained.
The arrangement was renewed in 2014. In a statement accompanying the
announcement, the European Central Bank simply stated, “Gold remains an
important element of global monetary reserves.”


Beijing, meanwhile, clearly has no ideological aversion to keeping
gold. From 1980 to the end of 2002, Chinese authorities held on to
nearly 13 million ounces. They boosted their holdings to 19 million
ounces in December 2002, and to 34 million ounces in April 2009. At the
end of 2013, China was the world’s fifth-largest sovereign holder of
gold, behind only the United States (261 million ounces), Germany (109
million ounces), Italy (79 million ounces), and France (78 million
ounces). The IMF had 90 million ounces.


However much gold China accumulates, though, a larger issue remains
unresolved: whether free, unregulated capital markets can coexist with
an authoritarian state. China has progressed a long way from the early
initiatives of Chinese leader Deng Xiaoping. It is approaching the
unthinkable goal of matching the United States in total GDP, even if
only in terms of purchasing-power parity. But going forward, the large
gains of recent years are going to become ever more difficult to
sustain.

It thus seems unlikely that, in the
years immediately ahead, China is going to be successful in vaulting
over the United States technologically, more for political than economic
reasons. A culture that is politically highly conformist leaves little
room for unorthodox thinking. By definition, innovation requires
stepping outside the bounds of conventional wisdom, which is always
difficult in a society that inhibits freedom of speech and action.

To date, Beijing has been able to
maintain a viable and largely politically stable society mainly because
the political restraints of a one-party state have been offset by the
degree to which the state is seen to provide economic growth and
material wellbeing. But in the years ahead, that is less likely to be
the case, as China’s growth rates slow and its competitive advantage
narrows.

Copyright © 2002-2012 by the Council on Foreign Relations, Inc.
All rights reserved. To request permission to distribute or reprint this article, please fill out and submit a Permissions Request Form. If you plan to use this article in a coursepack or academic website, visit Copyright Clearance Center to clear permission.

---

Return to Article: http://www.foreignaffairs.com/articles/142114/alan-greenspan/golden-rule

Home > Snapshot > Golden Rule

Published on Foreign Affairs (http://www.foreignaffairs.com)

Links:
[1] http://www.amazon.com/The-Map-Territory-Nature-Forecasting/dp/1594204810

Read the article on Foreign Affairs here: Golden Rule:





 The Pangea Advisors Blog

#Caribbean Islands continue to offer #Citizenship in return for Investing in #RealEstate @WSJ

Caribbean Exchange: Invest in Property and Get Citizenship - WSJ

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Grenada started its citizenship plan to help finance the expansion of its 22-villa Mount Cinnamon resort. Mount Cinnamon Resort

 

With
lending still tight in the Caribbean, several island nations are
embracing an unorthodox method of financing resort and villa projects:
selling citizenship.

The Caribbean vacation-home market has seen
an uneven recovery from the downturn. Sales volumes and prices for
existing homes are rising in larger markets and those with direct
flights to the U.S. But new construction of resorts and for-sale villas
remains hobbled, especially in smaller nations eschewed by most
conventional lenders.

One solution for islands such as St. Kitts,
Nevis, Grenada and Antigua has been to grant citizenship to qualified
investors who agree to spend several hundred thousand dollars buying
home lots or investing in hotel projects there.

The infusions help the islands get tourist destinations constructed. The investors, for their part, receive Caribbean passports.

The
programs are a draw for investors from countries such as China who
often need multiple forms of identification, such as a visa in addition
to their home-country passport, to travel to certain parts of the world.
Obtaining a Caribbean passport allows them to travel visa-free in many
cases.

What's more, some participants can end up paying lower
taxes as Caribbean-nation citizens than as citizens of their home
country, though to get the break they might need to spend a certain
amount of time each year in the Caribbean nation in question.

The
growing popularity of citizenship-by-investment programs underscores the
difficulty of obtaining conventional financing in the Caribbean. Many
smaller nations struggle with fickle tourism demand and limited airline
access, and all must contend with the damage inflicted by tropical
storms. Lenders have been especially leery of the Caribbean in recent
years after several high-profile resort projects ran out of financing
during the downturn and still languish half-built today.

St. Kitts's citizenship-by-investment program has helped the Christophe
Harbour resort sell many of the project's first 100 home sites. Christophe Harbour Development

 

On
St. Kitts, the developers of the 2,500-acre Christophe Harbour resort
community have used the government's citizenship-by-investment program
to sell many of the project's first 100 home sites in the past two years
and to finance construction of a Park Hyatt luxury hotel there.

St.
Kitts sets the minimum property price for investors gaining citizenship
through the program at $400,000. Lot prices at Christophe Harbour range
from $500,000 to $6 million. St. Kitts and sister island Nevis are home
to 55,000 people.

"It isn't easy to find buyers, especially in
the economy we've had" since the downturn, said Thomas Liepman, director
of sales for Christophe Harbour, a joint venture of Kiawah Partners of
Charleston, S.C., and a St. Kitts quasi-government agency. "But
citizenship has driven a recession-proof demand to this tiny island."

Grenada,
an island of 106,000 residents, started its citizenship-by-investment
program last year to help finance the expansion of its 22-villa Mount
Cinnamon Resort and Beach Club. The project's developer, British
hotelier Peter de Savary, aims to build another 80 villas on the site by
soliciting foreigners seeking Grenadian citizenship. He is doing the
same at a mixed-use project elsewhere in Grenada called Port Louis,
which includes a yacht marina, shops and, eventually, villas.

Some
developments are able to sell some lots to Americans who don't want or
need dual citizenship. But Americans alone aren't enough to finance most
projects. Instead, many projects gain most of their investments from
people who routinely encounter travel restrictions and obstacles due to
their country of origin.

"They're marketing to people who are
Russian, Middle Eastern or Chinese," said James Andrews, senior managing
director of Integra Realty Resources Inc., a valuation and consulting
firm specializing in the region's resort and hotel properties. "They get
a [Caribbean] passport, and they don't even have to live there."

St. Kitts sets the minimum property price for investors gaining citizenship through the program at $400,000. Christophe Harbour Development

 

St.
Lucia, Barbados, Bermuda and other islands, fretting that they will
fall behind in tourism development, are studying whether to offer their
own citizenship-by-investment programs.

The Caribbean programs are
similar to those used elsewhere, but provide faster access to
citizenship. In Europe, qualified applicants can gain visas from Spain,
Portugal or Latvia by buying property in those countries. France,
Singapore and the U.S. grant visas to qualified applicants who invest in
companies or projects that create a minimum number of jobs over a set
period.

One big drawback of the programs is the potential for
fraud. Authorities are concerned that without strict oversight, the
programs can be used by money launderers and other criminals for
unfettered travel.

In May, the U.S. Treasury Department sent banks
a warning letter that foreign investors, namely Iranian nationals, were
"abusing" St. Kitts' citizenship-by-investment program for "illicit
financial activity," according to the letters. St. Kitts suspended
Iranians from its program in 2013, but the U.S. alleges Iranians
continue to get St. Kitts passports.

The developers of Christophe Harbour on St. Kitts have teamed with the
government to provide citizenship to qualified applicants who invest at
least $400,000 apiece in the resort community. Christophe Harbour Development

 

In
response, the prime minister of St. Kitts and Nevis has said in public
forums this year that he has instructed his administration to improve
the program's vetting of applicants.

St. Kitts and other Caribbean
nations run the risk that if their vetting of applicants is lax, other
countries will start placing greater restrictions on travelers using
Caribbean nations' passports.

"That could devalue the citizenship
of the issuing country" and undermine its tourism-development program,
said Madeleine Sumption, a research director at Migration Policy
Institute, a Washington, D.C., think tank.

Write to Kris Hudson at kris.hudson@wsj.com



Read the article online at the Wall Street Journal: Caribbean Exchange: Invest in Property and Get Citizenship - WSJ

Playing private placements in natural resources recovery @Mineweb

From @SprottGlobal

Rick Rule believes that if you’re able to take part in these transactions, they could be attractive ways to take advantage of a recovery in natural resources, Henry Bonner writes.

Playing private placements in natural resources recovery

Author: Henry Bonner
Posted: Thursday , 04 Sep 2014 

(Sprott Global) - 

Some investors are able to participate in private placements, where a company raises money by offering new shares. For US investors to participate in a private placement, they must be suitably qualified for the offering. Suitability depends on the exemptions under the Securities Act of 1933 through which the company is able to offer new shares. This loosely means that the investor must meet a certain threshold of net worth, income, or investable assets in order to participate.

Private placements may be done by private or publicly trading companies. When a public company issues shares in a private placement, the new shares are not freely tradable, but must be held for a specified period of time, and must have their trading restriction lifted by the issuer’s legal counsel before they can be sold.

Rick Rule believes that if you’re able to take part in these transactions, they could be attractive ways to take advantage of a recovery in natural resources:

Let’s define what a private placement is: a private issuance of new equity, new debt, or new warrants, from the treasury of a public or private issuer. It’s not a secondary market transaction of securities that have already been issued, but rather an issue of new treasuries that isn’t registered as a public offering.

The advantage of private placements to the participant, in a traditional equity private placement, is that you often acquire an amount of stock that would be difficult to buy in the market for a small cap stock. You get to acquire the stock on terms that are set with the issuer, and not set by the vagaries of the bid and ask in the market. You may also be able to acuqire a warrant or a half-warrant along with your shares. A warrant is the right but not the obligation to buy more shares at a fixed price. It’s this leverage in the warrant that has made Sprott Global an active participant in private placement markets for 30 years.

Increasingly, other forms of private placements have become interesting to the people who run Sprott, myself included. We have found that, particularly in the United States, the costs of running a public company are so extraordinary that for ventures requiring less than $50 million in capital, we are better off funding private companies who avoid many of these costs.

So, increasingly, at Sprott, we are investing by way of private equity transactions, or we’re doing business in unincorporated joint ventures or partnerships. That’s particularly true where our goal is income. We find that the public 'wrapper' -- with the ongoing expense of a public listing, including legal, audit, and Sarbanes-Oxley fees -- is inefficient and reduces the amount of income that can be distributed by the company to the investor.

So one of the things that Sprott customers will be seeing with increased frequency in the next 5 years, particularly with regards to income-generating transactions, will be privately placed debt instruments from public issuers, oil and gas income opportunities, and infrastructure income from opportunities like terminals and pipelines. Theses are not publicly-trading equities, but rather, they are either shares in limited liability companies or in limited partnerships designed to funnel money directly to investors and that are exempt from filing fees, Sarbanes-Oxley, and registration statements.

Readers should know that in order to participate in placements generally, they need to have a certain level of assets based upon the type of exemption the offering utilizes. Often, investors need to have $1 million in investable assets; in some cases, the investor must be a Qualified Purchaser, meaning they have $5 million in investable assets. It will be important for investors to understand, when analyzing private placements for their own portfolios, which of these classifications they are in. That’s of course a function of their investable capital.

Playing private placements in natural resources recovery - GOLD NEWS - Mineweb.com Mineweb





The Pangea Advisors Blog

Should #Venezuela Default? by Ricardo Hausmann and Miguel Angel Santos - Project Syndicate

Excellent piece on the predicament of Venezuela as it faces a cash crunch. More than $6 billion are due by the end of the year, an amount that would devastate its foreign reserves, currently at just over $9 billion. 

Should Venezuela Default?

By Ricardo Hausmann and Miguel Angel Santos

Ricardo Hausmann, former Venezuelan Planning minister and chief Economist at the IADB, and Miguel Angel Santos are professors at Harvard University.  

CAMBRIDGE – Will Venezuela default on its foreign bonds? Markets fear that it might. That is why Venezuelan bonds pay over 11 percentage points more than US Treasuries, which is 12 times more than Mexico, four times more than Nigeria, and double what Bolivia pays. Last May, when Venezuela made a $5 billion private placement of ten-year bonds with a 6% coupon, it effectively had to give a 40% discount, leaving it with barely $3 billion. The extra $2 billion that it will have to pay in ten years is the compensation that investors demand for the likelihood of default, in excess of the already hefty coupon.

Venezuela’s government needs to pay $5.2 billion in the first days of October. Will it? Does it have the cash on hand? Will it raise the money by hurriedly selling CITGO, now wholly owned by Venezuela’s state oil company, PDVSA?

A different question is whether Venezuela should pay. Granted, what governments should do and what they will do are not always independent questions, because people often do what they should. But “should” questions involve some kind of moral judgment that is not central to “will” questions, which makes them more complex. 

One point of view holds that if you can make good on your commitments, then that is what you should do. That is what most parents teach their children.

But the moral calculus becomes a bit more intricate when you cannot make good on all of your commitments and have to decide which to honor and which to avoid. To date, under former President Hugo Chávez and his successor, Nicolás Maduro, Venezuela has opted to service its foreign bonds, many of which are held by well-connected wealthy Venezuelans.

Yordano, a popular Venezuelan singer, probably would have a different set of priorities. He was diagnosed with cancer earlier this year and had to launch a social-media campaign to locate the drugs that his treatment required. Severe shortages of life-saving drugs in Venezuela are the result of the government’s default on a $3.5 billion bill for pharmaceutical imports.

A similar situation prevails throughout the rest of the economy. Payment arrears on food imports amount to $2.4 billion, leading to a substantial shortage of staple goods. In the automobile sector, the default exceeds $3 billion, leading to a collapse in transport services as a result of a lack of spare parts. Airline companies are owed $3.7 billion, causing many to suspend activities and overall service to fall by half.

In Venezuela, importers must wait six months after goods have cleared customs to buy previously authorized dollars. But the government has opted to default on these obligations, too, leaving importers with a lot of useless local currency. For a while, credit from foreign suppliers and headquarters made up for the lack of access to foreign currency; but, given mounting arrears and massive devaluations, credit has dried up.

The list of defaults goes on and on. Venezuela has defaulted on PDVSA’s suppliers, contractors, and joint-venture partners, causing oil exports to fall by 45% relative to 1997 and production to amount to about half what the 2005 plan had projected for 2012.

In addition, Venezuela’s central bank has defaulted on its obligation to maintain price stability by nearly quadrupling the money supply in 24 months, which has resulted in a 90% decline in the bolivar’s value on the black market and the world’s highest inflation rate. To add insult to injury, since May the central bank has defaulted on its obligation to publish inflation and other statistics.

Venezuela functions with four exchange rates, with the difference between the strongest and the weakest being a factor of 13. Unsurprisingly, currency arbitrage has propelled Venezuela to the top ranks of global corruption indicators.

All of this chaos is the consequence of a massive fiscal deficit that is being financed by out-of-control money creation, financial repression, and mounting defaults – despite a budget windfall from $100-a-barrel oil. Instead of fixing the problem, Maduro’s government has decided to complement ineffective exchange and price controls with measures like closing borders to stop smuggling and fingerprinting shoppers to prevent “hoarding.” This constitutes a default on Venezuelans’ most basic freedoms, which Bolivia, Ecuador, and Nicaragua – three ideologically kindred countries that have a single exchange rate and single-digit inflation – have managed to preserve.

So, should Venezuela default on its foreign bonds? If the authorities adopted common-sense policies and sought support from the International Monetary Fund and other multilateral lenders, as most troubled countries tend to do, they would rightly be told to default on the country’s debts. That way, the burden of adjustment would be shared with other creditors, as has occurred in Greece, and the economy would gain time to recover, particularly as investments in the world’s largest oil reserves began to bear fruit. Bondholders would be wise to exchange their current bonds for longer-dated instruments that would benefit from the upturn.

None of this will happen under Maduro’s government, which lacks the capacity, political capital, and will to move in this direction. But the fact that his administration has chosen to default on 30 million Venezuelans, rather than on Wall Street, is not a sign of its moral rectitude. It is a signal of its moral bankruptcy.

Should Venezuela Default? by Ricardo Hausmann and Miguel Angel Santos - Project Syndicate

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________________________ The MasterLiving Blog

Chandler is at it again: Singapore Billionaire Bets Big on #Energy in #Africa, #Asia @Businessweek

Here's a piece on the secretive New Zealand investor from BusinessWeek.


Singapore Billionaire Bets Big on Energy in Africa, Asia

In September 2007, almost a year after New Zealand–born billionaire Richard Chandler founded investment firm Orient Global in Singapore, he made a rare appearance at a forum on social responsibility. Abandoning his penchant for privacy, Chandler outlined the link between giving and investing.

“We start to ask the question, where would the incremental dollar achieve the greatest return?” said Chandler. “Charity is good, performance philanthropy is better, and social investment is best.”

Chandler attended the global executive summit in Singapore again the following year -- and then dropped back out of public view, Bloomberg Markets magazine will report in its July/August issue. He doesn’t speak to the press. Current and former employees of his firm, now called Chandler Corp., don’t talk about him, citing nondisclosure agreements. Executives of most companies in which Chandler invests deal only with his staff.

“I never met him and I don’t know him,” says Indian billionaire Malvinder Singh, whose Fortis Healthcare Ltd. sold its entire stake in Vietnamese hospital company Hoan My Medical Corp. to Chandler Corp. for $80 million in August 2013, according to Fortis’s statement.

Behind the silence, Chandler, 55, is amassing a fortune that the Bloomberg Billionaires Index estimated at $3.7 billion on June 18. Energy-related companies account for at least $1.2 billion of his wealth.

Far-flung Locales

Chandler is betting on gas and oil in far-flung locales from Papua New Guinea to Kenya and Ethiopia, banking on demand from Asia’s growing middle class.

The firm invested in InterOil Corp., which has offices in Singapore and Port Moresby, Papua New Guinea. InterOil controls 35.5 percent of the exploration license that contains Papua New Guinea’s Elk and Antelope fields -- the island nation’s biggest undeveloped gas plays, according to InterOil. Chandler Corp.’s 19.6 percent InterOil stake was valued at $639 million on May 30.

Chandler Corp.’s investments in Southeast Asia extend beyond energy to consumer goods and financial services. The firm holds a $366 million stake in Vietnam’s Masan Group Corp. The company makes foods and beverages, offers banking services and mines tungsten and bismuth. In health care, Chandler Corp. owns a minority share of Medical City, a network of three hospitals and 23 outpatient clinics in the Philippines.

Chandler Corp. says its companies deliver health-care services to more than 2.5 million people in Vietnam and the Philippines each year.

‘Social Value’

“We look to invest in businesses that create social value and drive national prosperity,” Chandler Corp.’s website says.

Chandler is building on a fascination with emerging markets that began with Hong Kong in the 1980s and extended to Brazil, Russia and India. He remains famous for his campaign at SK Corp., South Korea’s largest oil refiner, says Seo Jae Hyeong, chief executive officer of Seoul-based Daishin Asset Management Co.

“People still have vivid memories of how an obscure fund waged a war against the SK chairman,” he says.

Chandler and his younger brother, Christopher, bought 14.99 percent of SK from March 26 to April 11, 2003. The shares had plunged 63 percent in five days earlier that March after SK reported it had misstated 2001 earnings at its trading arm by about $1.5 billion.

The Chandlers fought to oust Chairman Chey Tae Won, who’d been convicted of accounting fraud. Investors bought the shares over two years as the battle intensified, and SK boosted outside directors to 70 percent of the board from 50 percent.

By the time Chey defeated the Chandlers’ bid to remove him, in 2005, the stock had soared more than fivefold from the average 9,293 won per share the brothers paid. They walked away with more than $700 million in gains, calculations based on regulatory filings show.

‘Corporate Governance’

“The Chandler brothers contributed greatly to Korea by raising the awareness of corporate governance and provided an impetus for big companies to change,” Seo says.

Christopher Chandler, 54, now owns Dubai-based investment firm Legatum Group. Last year, his Legatum Foundation started the $100 million Freedom Fund with two partners to combat modern-day slavery. Christopher, like his brother, declined to comment for this story.

Sino-Forest

Richard Chandler stumbled in 2012. Chandler Corp. started buying Chinese timber company Sino-Forest Corp. after the company’s shares, which traded on the Toronto Stock Exchange, plunged 84 percent in two days.

Short seller Carson Block’s research firm said in a June 2, 2011, report that Sino-Forest was overstating the value of its assets. Hedge-fund firm Paulson & Co. sold its entire stake after the report and lost C$462 million ($426 million).

Chandler Corp. continued buying until the Ontario Securities Commission halted trading in August 2011. Chandler Corp. amassed a 19.5 percent stake as Sino-Forest’s biggest shareholder.

Sino-Forest filed for bankruptcy protection in March 2012, and the company has since been taken over by bondholders, according to Chandler Corp. David Walker, a forestry expert who’d been hired to lead a turnaround at Sino-Forest, was named Chandler Corp. CEO in January 2013. Chandler Corp. says Walker no longer works there because the firm isn’t involved with Sino-Forest.

Gas Fortune

One of Chandler Corp.’s current emerging-markets bets is liquefied natural gas. Last year, Asia accounted for 75 percent of global LNG demand of 236.9 million tons, according to the Paris-based International Group of LNG Importers.

Africa is growing as a gas supplier. More than 14 trillion cubic meters (500 trillion cubic feet) has been discovered in Angola, Ghana, Mozambique, Nigeria and Tanzania, according to Seah Moon Ming, CEO of Pavilion Energy Pte, the LNG unit of Temasek Holdings Pte, Singapore’s state-owned investment company.

“You can make a fortune in Africa if you can find oil and gas and if it’s economical to get it out of there,” says Jim Rogers, chairman of Singapore-based Rogers Holdings, who correctly predicted a commodities rally in 1999.

Asia’s deep-pocketed investors are expanding globally by acquiring LNG assets. Pavilion Energy said in November it had invested $1.3 billion in Tanzanian gas blocks. In May, Cheung Kong Group, owned by Li Ka-shing, Asia’s richest man, agreed to acquire Envestra Ltd., an Australian natural gas distributor, for A$2.4 billion ($2.2 billion).

‘Seismic Shift’

“LNG is the future,” says Chua Ma Yu, executive chairman of CMY Capital Markets Sdn. in Kuala Lumpur. “Throughout Asia, governments are building LNG terminals and gas pipelines as they respond to this seismic shift.”

Chandler is hunting for further riches in Africa’s petroleum reserves. Chandler Corp. holds a 9.9 percent stake, valued at $220 million, in Africa Oil Corp., a Canadian company that discovered Kenya’s first crude with a partner, Tullow Oil Plc, in 2012.

Africa Oil is a logical choice for bargain hunters such as Chandler, says Stuart Amor, London-based head of oil and gas research at RFC Ambrian Ltd., a natural resources adviser and broker. 

Recent crude discoveries in Kenya may generate about $10 billion in revenue in three decades of production, London-based GlobalData said in May. In Nigeria, the continent’s biggest oil producer, Chandler Corp. owns 13.4 percent of Union Bank of Nigeria Plc. The lender has more than 350 branches that offer credit to a rising middle class.

“This should enable businesses and entrepreneurs to flourish, supporting and accelerating Nigeria’s economic growth,” Richard Chandler said in an Oct. 19, 2012, statement.

Geothermal Energy

Chandler Corp. is also pursuing geothermal energy through Orka Energy, which operates in China, Iceland and the Philippines; coal-bed methane gas in China via Hong Kong–based Green Dragon Gas Ltd.; and natural gas and power in Indonesia and the Philippines with Energy World Corp.

As Chandler cultivates his empire, he has funded artists and activists who aid the disadvantaged. In 2007, he formed Freedom to Create to encourage change in developing countries. In 2011, the foundation honored Sister Fa, a musician from Senegal who raises awareness about female genital mutilation.

“Mr. Chandler is an incredibly talented investor with a deeply embedded moral purpose,” says Priti Devi, who headed the foundation from 2010 to 2012. Devi says she didn’t find Chandler to be secretive. Instead, she says, “he has adopted what he believes is the most effective operating style for him.”

‘Your Investor’

Chandler isn’t shy about revealing his aspirations on his website.

“My passion is my art -- allocating capital to the world’s best investment opportunities,” he writes.

Newcastle University education policy professor James Tooley recalls Chandler’s commitment to scholarship. After the Financial Times published Tooley’s essay titled “Low-Cost Schools in Poor Nations Seek Investors” in September 2006, Tooley received a voice mail from Chandler.

“Professor Tooley, I’ve read your article,” it said. “I’m your investor.”

Tooley joined Chandler’s Orient Global investment firm in April 2007 as president of its $100 million Education Fund. The fund sought to combat global illiteracy by enhancing education for low-income communities in developing countries. Its Hyderabad, India–based Rumi Education collaborated with more than 100 schools. Chandler dismissed Tooley in 2009; Tooley declined to discuss the circumstances. Rumi Education has since been sold to its management team. Chandler’s education initiatives now involve philanthropic grants, according to Chandler Corp.

New Zealand

Chandler draws inspiration from his mother, Marija, employees who have worked at Chandler Corp. say. A native of Croatia, Marija met her New Zealander husband, Robert Chandler, in 1955. Robert and Marija founded New Zealand luxury department store Chandler House in 1972, according to Chandler Corp.’s website.

As she scoured the world to stock the shelves, Marija instilled an appreciation for hard work, entrepreneurship and creativity in her boys: George, the oldest; Richard, the middle; and Christopher, the youngest. The couple sold Chandler House and gave the proceeds to their sons. The family moved to Monaco, where Richard and Christopher started Sovereign Global Investment in 1986. The brothers split amicably in December 2006. Christopher founded Legatum Capital in Dubai, and Richard set up Orient Global in Singapore.

Business, Art

Marija melded business with art. She began painting and adopted her mother’s name, Ana Tzarev. She also traveled. One YouTube video shows her visiting schoolchildren in Africa. In another, she talks about her billionaire sons at her father’s grave in Trogir, Croatia.

“They thank you for your philosophy on commerce,” she says to her father, “for they’re helping the world because of you.”

Chandler described his business approach to philanthropy at the Singapore forum.

“It’s very much a balance of science and art,” he said. “It’s a capital allocation process. It’s based on information. It’s based on common sense. Think strategic and, above all, sustainability.”

RFC Ambrian’s Amor, who has followed Chandler since the 1990s, offers this assessment of the billionaire investor’s current emerging-markets forays: “It would not be wise to bet against him now.”

To contact the reporters on this story: Yoolim Lee in Singapore at yoolim@bloomberg.net; Netty Ismail in Singapore at nismail3@bloomberg.net

To contact the editors responsible for this story: Michael Serrill at mserrill@bloomberg.net Gail Roche, Jonathan Neumann

http://www.businessweek.com/printer/articles/752717?type=bloomberg

Singapore Billionaire Bets Big on Energy in Africa, Asia - Businessweek

Everyone recommends investing in #HedgeFunds. Nobody is providing the opposite view.” @NewYorker

The results don't justify the hefty fees. 

Everyone—consultants, advisers, funds of funds, capital introduction groups of prime brokers—recommends investing in hedge funds. Nobody is providing the opposite view.”

HOW DO HEDGE FUNDS GET AWAY WITH IT? EIGHT THEORIES

The other day, I asked how hedge funds manage to bestow such great riches on their managers despite the fact that, in many cases, their performance seems pretty ordinary. That got quite a reaction. The responses ranged from claims that hedgies are remunerated perfectly appropriately to charges that they are outright crooks who prey on gullible and greedy investors. Because the industry has grown enormously in recent years—according to one industry source, hedge funds now manage about $2.1 trillion of capital, a good deal of which comes from pension funds and charitable endowments—it’s not a trivial matter which of these explanations is the most accurate.

The crux of the issue is the industry’s two-tiered fee structure, which includes a hefty management fee (two per cent has long been the standard) and a big performance fee (twenty per cent is the standard). Here, again, is the question I posed. “Why do investors in hedge funds—the people whose money is at risk—continue to allow the managers of the funds to dictate such onerous terms to them?” I will consider various theories in order of plausibility, starting with the one that I consider least persuasive. Along the way, I’ll deal with some details that I didn’t have space for in my previous post.

1. They deliver superior returns. Several commenters said that it wasn’t fair to single out last year, when hedge funds generated a return of 7.4 per cent (net of fees), according to Bloomberg, and the S&P 500 produced an over-all return of about thirty-two per cent. Fair enough: let’s look at how investors in hedge funds have fared over a longer period.

According to the industry’s own figures, over-all returns have been falling steeply over the past decade or so. A study by KPMG, which was commissioned by the Alternative Investment Managers Association, an industry trade group, found that, between 1994 and 2011, hedge funds, on average, generated an average return of nine per cent. But Simon Lack, a financial consultant who used to work for J.P. Morgan and has written a skeptical book about hedge funds, points out that this figure disguises a sharp deterioration in recent years. Between 1994 and 1998, Lack points out in a presentation that is available online, the average return made by hedge funds was twelve per cent; between 2007 and 2011, it was just two per cent.

Even these figures aren’t necessarily reliable. They are calculated on the basis that each investor buys into a fund, or a range of funds, at the beginning of the period under study and holds on until the end, rebalancing his or her portfolio along the way so that the stake remains constant. But that isn’t how things work. Most investors buy in late, deploying and withdrawing big chunks of capital at irregular intervals. To take account of this behavior, Lack and others have redone the figures, calculating “dollar-weighted” rates of return, which provide a more accurate picture of how hedge-fund investors actually fared than the traditional “value-weighted” figures.

The difference this makes is quite substantial. According to Lack’s figures, between 1994 and 2011, hedge funds generated an annual return of six per cent rather than nine per cent. They did about the same as the stock market, which produced an annual return of 5.8 per cent, but not as well as bonds, which generated an annual return of 7.2 per cent.

An older study by Ilia D. Dichev and Gwen Yu, two academics who were then at the University of Michigan, produced broadly similar results. Dichev and Yu found that, between 1980 and 1992, when the hedge-fund industry was still very small, it generated an annual (value-weighted) return of 19.8 per cent—a very impressive figure. But, between 1993 and 2006, the annual rate of return fell to 11.1 per cent. These figures are for unadjusted value-weighted returns. When the authors converted them to dollar-weighted numbers, they found that hedge funds produced an annual return of twelve per cent between 1980 and 2006. That’s less than the annual return of 13.5 per cent that the S&P 500 produced over the same period.

The message from both studies is clear: hedge funds, on average, don’t outperform the stock market. In what sense, then, can their returns be considered superior? The next theory provides a possible answer.

2. They deliver superior risk-adjusted returns. O.K., an embattled consultant might say, hedge funds don’t necessarily beat the stock-market index over the long term, but they are much safer. They do, after all, have the word “hedge” in their names, and offer, as well as a sense of safety, decent returns.

The short answer to this is “2008,” when hedge funds, as an asset class, lost more than twenty per cent of their value. Some individual funds, such as Ray Dalio’s Bridgewater, which I wrote about at length in 2011, did well, but the industry as a whole did terribly. Just how terribly? According to Lack’s figures, hedge-fund losses in 2008 came to about four hundred and fifty billion dollars. That was considerably more than all the profits that the industry had generated in its entire history.

A statistician might argue that this isn’t a winning argument because, again, it focuses on one bad year. But that, surely, is the point. If hedge funds really are a hedge, rather than a way of trying to buy above-market returns, they should perform well precisely when everything else is going to pot. But they didn’t.

Here’s another way to look at it. If somebody offered you a costly investment that combined the promise of safety with the lure of attractive returns, how would you assess it? Well, one way might be to compare it to a hypothetical “sixty-forty” investment portfolio—sixty per cent stocks, forty per cent bonds—of the sort that regular investment advisers have been recommending to their cautious clients since the year dot. Lack carried out this exercise, looking at figures going back to 1998. In 2000 and 2001, when the dotcom bubble burst, hedge funds did what they are meant to do, he found: they outperformed the sixty-forty portfolio. But, in every year since 2002, including 2011, when the stock market was flat, the sixty-forty portfolio, which can be constructed very cheaply, did better than the average hedge fund.

3. They deliver uncorrelated returns. This is supposedly the sophisticated defense of hedge funds. By using a variety of techniques unavailable to ordinary folk, such as momentum investing, long/short investing, and betting on global macroeconomic trends or the outcome of mergers, they generate a special type of return, known as “alpha,” which is quite separate from the gains that can be reaped from more straightforward investments in various markets, known as “beta.”

Here we get into some complicated, contested, and almost theological debates. Rather than delving into them at length, I’ll confine myself to discussing a 2010 study that Roger Ibbotson, a finance professor at Yale, and two of his associates carried out. Defenders of hedge funds often cite it because it concluded that the funds do generate alpha on a consistent basis. “The positive hedge fund aggregate alphas for the last eleven years in succession suggest that hedge funds really do produce value,” the paper says.

Ibbotson and his colleagues start out by looking at the over-all peformance that hedge funds deliver. They calculate traditional value-weighted returns, rather than dollar-weighted ones, but they adjust them for a couple of other problems that are known to afflict hedge-fund data—the “survivorship bias” and the “backfill bias.” When these adjustments are made, it turns out that, between 1995 and 2009, hedge funds produced an annual average return of 7.63 per cent. Over the same period, the S&P 500 generated an annual return of 8.04 per cent.

This confirms that hedge funds don’t beat the stock market. How, then, can they be said to generate alpha? Ibbotson and his colleagues use a statistical model that seeks to explain the variability in hedge-fund returns on the basis of several variables, the most important of which are the market returns yielded by stocks, bonds, and cash. Broadly speaking, any returns that these variables can’t explain are attributed to alpha, and are thereby assumed to be generated by the skill and expertise of the hedgies.

Rather than discussing the pluses and minuses of this methodology, let’s look at the results that it generates, two of which stand out. The first is that most of the returns that hedge funds generate aren’t alpha at all: they’re beta in disguise. Of that annual average return of 7.63 per cent, 4.62 percentage points come from beta, and just 3.01 percentage points come from alpha, according to Ibbotson and his colleagues. Contrary to their P.R. pitch, hedge funds aren’t operating oblivious to market conditions. Like ordinary investors, the returns that they receive mostly come from simply being exposed to the market.

The second striking, if unsurprising, finding is that the fees hedge funds charge swallow up much of the alpha they produce. Gross of fees, the annual return to investors over the period from 1995 to 2009 was 11.42 per cent. Management and performance fees reduced this figure by 3.79 percentage points. Even if hedge funds are generating alpha, they are keeping most of it for themselves.

4. Low interest rates. In order to remain solvent, many pension funds need to generate annual returns on their investments of six to eight per cent. With interest rates as low as they have been in the past few years, investing in government bonds and corporate bonds doesn’t produce a high enough return. And investing in the stock market is rightly perceived as risky.

This environment has generated a demand for high-yield, low-risk investments, even among investment professionals who understand, on an intuitive level, that the very phrase “high-yield, low-risk investment” may well be an oxymoron. Hedge funds have seized upon this opportunity to present themselves as the solution to an urgent problem. Even though the industry slipped up badly in 2008 and individual funds have an alarming tendency to blow up or get into legal trouble, it still portrays itself as a safer alternative to the stock market. This marketing strategy may be working: in the first quarter of this year, according to a news release from Hedge Fund Research, the amount of assets that the industry manages hit a new high of $2.7 trillion.

In an article posted at allaboutalpha.com, Dan Steinbrugge, a hedge-fund consultant, explains why this is happening:

Most institutions are currently using a return assumption of between 4% and 7% for a diversified portfolio of hedge funds which compares very favorably to core fixed income, where the expected return is only 2.5% to 3.0%. As long as the expected return is higher for hedge funds than fixed income, we will continue to see money shift from fixed income to hedge funds.

5. Lack of transparency.

#Switzerland ain't what it used to be: People Power Deters Companies @BloombergNews

Referendums galore

Swiss Corporate Magic Wanes as People Power Deters Companies

Switzerland’s liberal tax and labor laws made it a magnet for companies. Now the country’s open approach to politics is making it a repellent.

In the past 15 months, Swiss voters have approved a proposal to curb the inflow of foreigners and backed an initiative to limit executive pay including severance packages. In the latest referendum, on May 18, they will decide whether to introduce the world’s highest minimum wage, paying workers at least 22 francs ($25) per hour or 4,000 francs a month.

“It’s democracy at its best, but the multiplication of initiatives after a while has created chaos and nobody knows how to manage it,” said Michel Demare, chairman of Syngenta AG (SYNN), the world’s largest maker of crop chemicals. He also leads Swiss business lobby SwissHoldings. “There are very few large companies that moved to Switzerland in the last two to three years. Some decided to move out.”

The Swiss take direct democracy seriously, holding more plebiscites than anywhere else in Europe. What’s more, they are legally binding, giving the government little or no choice but to implement the will of the people regardless of pressure from companies or other European governments.

Voters in the Alpine nation have decided on at least 60 initiatives since 2000 and at least 20 more are in the pipeline, including ballots on agricultural commodity trading and another one on even stricter immigration limits.

Moving Out

“This is the first time in Swiss history that initiatives that are business unfriendly have been accepted,” Michael Hermann, a lecturer at the University of Zurich said. “Switzerland right now is not on top of the list of companies that are thinking about moving to another location.”

Switzerland traditionally allows multinational companies to pay less tax on income from outside the country.

While the government last year announced plans to change those rules to mollify the European Union, it plans to introduce new tax exemptions to stay competitive. Its labor laws meanwhile enable companies to fire employees more easily than in neighboring Germany or France.

Demare, 57, a Belgian who came to Switzerland in the early 1990s to work at the European headquarters of Dow Chemical Co., said Switzerland’s stable politics lured investment from multinationals. Now the 123-year-old tradition of referendums is putting that at risk, he said.

Itchy Feet

“We’re seeing a decline in the number of foreign companies” Swiss State Secretary Jacques de Watteville said of the country’s negotiations with the EU on corporate taxation, speaking at a conference in Lausanne today. “There’s a real pressure to keep companies.”

Weatherford International Ltd. (WFT), an oilfield services company, said in April that it plans to move its legal domicile to Ireland from Switzerland, where it located to in 2009.

Changes to Swiss law “would limit Weatherford’s ability as a multinational company to retain and attract key executive talent and directors,” Weatherford said in the invitation to its June 16 shareholder meeting to sign off the move. “A successful business requires a supportive and stable pro-business and regulatory environment.”

Kuehne & Nagel International AG, the world’s biggest sea-freight forwarder, also may consider transferring parts of its headquarters, currently in Schindellegi near Zurich, out of Switzerland should immigration curbs limit recruitment, according to majority shareholder Klaus-Michael Kuehne.

Insecure CFOs

A study of 111 Swiss chief financial officers by Deloitte & Touche LLP showed that 88 percent of them see the February vote on curbing immigration as having a negative effect on the country as a business location.

The vote was put forward by the Swiss People’s Party, or SVP, which has tapped into rising resentment toward immigrants. SVP Vice President Christoph Blocher last week announced he was giving up his seat in parliament to focus on referendums.

There’s “a certain feeling of insecurity among CFOs,” said Michael Grampp, an economist at Deloitte in Zurich. “Especially if you consider the likelihood of voters accepting more initiatives that have a political or economic impact.”

That’s not to say voters always cast their ballots in an unfavorable way for companies.

The Swiss have almost always taken a pro-business view in ballots about taxes and in 2012 rejected a proposal for six weeks of statutory vacation. The nation also remained the most competitive economy globally in the World Economic Forum’s annual ranking published in September.

Referendum Surge

The minimum wage proposal was opposed by 64 percent of respondents in a May 7 poll by researcher gfs.bern. The survey of 1,413 people had a margin of error of plus or minus 2.7 percentage points, the company said.

“Switzerland, within Europe, is still a bit of a haven,” Adecco SA (ADEN) Chief Executive Officer Patrick De Maeseneire said. “Don’t fix it if it’s not broken and Switzerland is for sure not broken, it has never been.”

The number of national initiatives since 2000 is higher than in the 80 years after they first began in in 1891. They first started proliferating in the 1970s as a wave of political activism in Europe continued in Switzerland.

A plebiscite on almost any topic can be called by collecting 100,000 signatures from the country’s 8 million people. As well as the new minimum wage, the Swiss also will decide on May 18 whether the country buys 3.1 billion francs worth of Saab AB (SAABB) Gripen combat jets.

The advent of the Internet and social media has made that task a lot easier and one way to reduce the number of votes would be to double the threshold, said Patrick Schellenbauer, a researcher at Avenir Suisse in Zurich, a research firm sponsored by companies including Nestle SA (NESN) and Philip Morris SA.

“If the political system isn’t adjusted the attraction of Switzerland as a place for business will be affected and investments will decline,” Schellenbauer said.

To contact the reporters on this story: Jan Schwalbe in Zurich at jschwalbe6@bloomberg.net; Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net Zoe Schneeweiss, Albertina Torsoli

Swiss Corporate Magic Wanes as People Power Deters Companies - Bloomberg

Excellent article on the Belgian business dynasties in the DR Congo, ex Zaire @jeuneafrique

Excellent article on the Belgian business dynasties in the DR Congo, ex Zaire.

(In French, use Google translate for our own language.

http://economie.jeuneafrique.com/index.php

Les Belges au Congo : prospères dynasties d'affaires

George Forrest (à gauche), surnommé le vice-roi du Katanga, ici à Lubumbashi, le 24 octobre 2010. © Gwenn Dubourthoumieu

Ils s'appellent Damseaux, Bia, Lippens... Enfants du plat pays, ils ont bâti de véritables empires en RD Congo. Transmis de père en fils, leurs groupes ont résisté aux convulsions de l'Histoire. Non sans mal.

Alors que, sur le trône de Belgique, la succession est assurée - le roi Philippe a prêté serment le 21 juillet -, en RD Congo, les dynasties belges du monde des affaires cherchent elles aussi à pérenniser leur pouvoir. Certaines ne sont plus à présenter aux Congolais. Ainsi les Forrest qui, en trois générations, ont construit Groupe Forrest International (GFI), un conglomérat qui détient des pans entiers de l'économie du Katanga (BTP, ciment, élevage, transport aérien) ; ou les Damseaux, qui ont bâti Orgaman, un empire agroalimentaire (plus de 100 millions d'euros de chiffre d'affaires), à partir de Kinshasa et du Bandundu (ouest du pays). Quant aux Lippens, ils se sont imposés dans la filière sucre à partir de leurs activités congolaises. À ces noms s'ajoutent d'autres "lignées" belges, moins en vue, mais tout aussi bien implantées dans ce vaste pays d'Afrique centrale. C'est le cas des Bia, dont le groupe du même nom est spécialisé dans les services miniers ; des frères Hasson, actifs dans la distribution de produits de grande consommation à Kinshasa ; des Demaeght, qui oeuvrent dans l'agroalimentaire au Katanga ; ou des Levy, présents dans la banque.

Ils ont beau tous se connaître, ils ne se font pas de cadeaux.

Héritiers du passé colonial ou postcolonial, ces grands groupes familiaux installés en RD Congo ont survécu à bien des épreuves. "Ils ont traversé la "zaïrianisation" sous Mobutu [nationalisation du secteur privé] et les conflits des années 1990 et 2000 [pillages, prise du pouvoir par Laurent-Désiré Kabila, guerre régionale dans le Kivu...]. Mais ils sont restés, ils avaient trop à perdre : toutes leurs possessions se trouvaient dans le pays. Ceux - plus nombreux - qui sont partis l'ont fait parce qu'ils pouvaient se refaire une santé en Belgique ou ailleurs", analyse Michel Losembe, directeur général de la Banque internationale pour l'Afrique au Congo (Biac).

Cliquez sur l'image.

Pour assurer leur pérennité, ces entreprises familiales ont tissé des liens étroits avec le pouvoir congolais. Surnommé le "vice-roi du Katanga", George Forrest avait l'oreille de Mobutu Sese Seko, le président du Zaïre. Et c'est à son groupe que ce dernier avait confié la réalisation de la piste de l'aéroport de Luano et de la base militaire de Kamina (Katanga), puis l'exploitation de la mine de cuivre de Kasombo. Ce qui n'a pas empêché Forrest de rebondir avec agilité lors de la transition politique, en 1997. Il a même été l'un des premiers à accueillir Laurent-Désiré Kabila (le père de Joseph, l'actuel président) à son entrée dans Lubumbashi. Toutefois, son groupe est moins bien en cour aujourd'hui et n'a pas été épargné par la révision des contrats miniers.

L'entreprise de William Damseaux a elle aussi souffert de la "zaïrianisation" des années 1970, et de la nomination désastreuse de proches du pouvoir à la direction d'Orgaman. Mais le patriarche a su reprendre les rênes après avoir gracieusement prêté ses camions frigorifiques lors des 20 ans du Mouvement populaire de la révolution [MPR], l'ancien parti unique, en 1988. Sous Laurent-Désiré Kabila, en 2000, il a été emprisonné parce qu'il n'avait pas respecté le blocage des prix des denrées alimentaires. Libéré, il s'est exilé en Belgique. Mais il est bientôt revenu en RD Congo, après l'avènement de Joseph Kabila, en janvier 2001.

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Nouvelle vague

Après les conflits meurtriers des années 1990, une nouvelle vague d'entrepreneurs belges a pris la relève. "À l'époque, la Gécamines - héritière de l'Union minière du Haut-Katanga -, le Groupe agropastoral, ou la Compagnie financière européenne et d'outre-mer (Finoutremer), tous historiquement liés à la Belgique, ont vu leurs actifs sombrer, raconte Thierry Claeys Bouuaert, vice-président de la chambre de commerce Belgique-Luxembourg-Afrique-Caraïbes-Pacifique et dernier ­administrateur-directeur général de la Belgolaise. Certains Belges - attachés au Congo et prêts à prendre des risques - en ont profité pour réaliser des opérations fructueuses en rachetant des sociétés à des expatriés sur le départ, souvent avec l'appui d'établissements financiers du royaume (notamment Générale de banque, devenue Fortis)." Ce fut le cas de Philippe de Moerloose (né à Lubumbashi), qui, en 1995, a acquis le distributeur automobile VRP (à la famille belge Theumis). Ou de Vincent Bribosia, repreneur des chantiers navals de Chanic. George Forrest a lui aussi saisi l'occasion en se portant acquéreur des cimenteries de Finoutremer-Egecim, puis des actifs congolais de la Belgolaise auprès de la banque Fortis. Entre les deux générations d'hommes d'affaires, les points communs ne manquent pas : "Philippe de Moerloose, [distribution automobile, d'équipements ( BTP & Minier) et de matériel agricole, hôtellerie et industrie] a noué avec Joseph Kabila le même type de relations que George Forrest avec Mobutu. Il a accès au palais, et règle certains détails des séjours bruxellois de l'épouse du président", confie un familier du milieu belgo-congolais.

Lire aussi :

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RD Congo : la Gécamines confirme le rachat de Platmin
RD Congo : comment relancer la machine économique ?Pour le belge Bia, le Katanga ne suffit pas

Si ces groupes bénéficient d'une telle longévité, c'est aussi parce que les passages de témoin d'une génération à l'autre sont bien préparés. "La transmission des groupes aux enfants est la meilleure solution pour qu'ils continuent d'exister. Pour les diriger, il faut être proche du fondateur, bien connaître la RD Congo et ses différents acteurs", explique Thierry Claeys Bouuaert. Et surtout, préserver la confidentialité des comptes et des accords. Ceux de GFI, par exemple, ne sont pas publics. Il faut se contenter des estimations d'un familier du groupe, qui évoque un chiffre d'affaires annuel de plus de 200 millions d'euros - hors activités bancaires et secteur aérien.

Ainsi, chez les Forrest, c'est Malta David, le petit-fils, qui a repris le flambeau : il est directeur général de GFI depuis 2011. "Il a été l'artisan du développement de notre filiale dans l'énergie, et dans l'agroalimentaire au Katanga", souligne Henry de Harenne, conseiller du groupe en Belgique. Chez les Damseaux, c'est Jean-Claude, lui aussi petit-fils du fondateur, qui assure la relève depuis sept ans. À la tête d'Orgaman, il a étendu la filière élevage - la plus importante d'Afrique centrale, avec 55 000 têtes de bétail. Et a lancé son groupe dans l'exploration minière dans l'est du pays.

Les sociétés belgo-congolaises se tournent de plus en plus vers les autres pays du contienent.

Influence

Pour dominer le marché congolais, ces entrepreneurs belges, qui se connaissent bien, se livrent une concurrence - commerciale ou d'influence - sans merci. "Philippe de Moerloose n'est pas notre ami", confie un collaborateur de GFI. "Chacun s'occupe de ses affaires. Je milite pour que les investisseurs viennent en RD Congo", précise l'intéressé, qui, dans le domaine de la sous-traitance minière, ne fait pas de cadeaux - ni à Bia, ni à Forrest.

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Bien que rivaux et se côtoyant peu, ils déploient souvent des stratégies proches. Même s'ils n'ont pas toujours d'attaches personnelles solides en Belgique (certaines familles ne sont belges que depuis peu : les Forrest sont d'origine néo-zélandaise, les Levy d'ascendance italienne et les Damseaux préfèrent Monaco), ils entretiennent de bonnes relations avec les milieux politiques du royaume. Pour eux, il s'agit de préserver leur réputation "au pays", où la plupart ont installé une holding - et où leurs activités ne sont pas toujours bien perçues. Ainsi, Philippe de Moerloose a embauché Geert Muylle, l'ancien conseiller politique d'Yves Leterme (ex-Premier ministre belge) pour assurer sa communication en Europe. De son côté, George Forrest a recruté Olivier Alsteens, ex-directeur de la communication externe des Premiers ministres belges (2002-2003) et ancien porte-parole de Louis Michel (ex-ministre des Affaires étrangères et ex-commissaire européen). Lequel, très écouté par Joseph Kabila, a d'ailleurs joué un rôle dans la relance des relations belgo-congolaises. Autre point commun : les sièges des Bia, Moerloose et Forrest sont installés dans la même ville, Wavre (à 20 km au sud de Bruxelles), dont le bourgmestre n'est autre que Charles Michel, fils de l'ancien commissaire européen.

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Désormais bien implantées en RD Congo, les sociétés belgo-congolaises se tournent de plus en plus vers les autres pays du continent, et au-delà. À tel point que certaines n'ont plus grand-chose de congolais. À l'instar de Finasucre (famille Lippens), dont la majorité des actifs se situe en Belgique, en Chine et en Australie, et qui ne détient plus que la Compagnie sucrière de Kwilu-Ngongo (Bas-Congo) en RD Congo. Les Bia, eux, se sont appuyés sur leur expertise en montage et entretien d'engins miniers au Katanga pour offrir leurs services dans vingt pays d'Afrique francophone. Quant à la Société de distribution africaine (SDA) de Philippe de Moerloose, elle est implantée dans vingt-sept États africains. Et même si Malta David Forrest ne cesse de rappeler son attachement au pays qui l'a vu naître, son groupe a choisi lui aussi de s'africaniser : il est déjà présent dans la construction et l'énergie au Congo et au Kenya.

Les échanges commerciaux n'ont plus la frite
Le volume des échanges entre Bruxelles et Kinshasa n'est rien comparé à la puissance des conglomérats belgo-congolais.

Malgré ses liens historiques avec le royaume, la RD Congo figure au bas des classements de l'Agence belge pour le commerce extérieur. Elle ne représente plus que 350 millions d'euros d'exportations et 284 millions d'euros d'importations, soit un microscopique 0,1 % des flux commerciaux de la Belgique en 2012. Et elle n'est désormais que son sixième partenaire commercial africain. En 2012, les Belges ont exporté davantage en Afrique du Sud (1,75 milliard d'euros), au Nigeria (1,49 milliard), au Togo, en Angola et au Sénégal qu'en RD Congo. "En dehors de quelques acharnés, comme Philippe de Moerloose, qui est un enfant du pays, les entrepreneurs belges se désintéressent quasi totalement de la RD Congo. Ils n'ont plus cette passion ! Ils se concentrent sur l'Europe. Les groupes chinois, israéliens et même français sont bien plus agressifs ici", regrette Michel Losembe, patron de la Banque internationale pour l'Afrique au Congo (Biac), qui a fait ses études à Bruxelles. Toutefois, la tendance s'inverse légèrement : depuis cinq ans, les exportations belges à destination de la RD Congo ont progressé de 68 %.  C.L.B.

Droit de réponse

Suite à l'article "RD Congo, une histoire belge" paru dans le n°2743 de Jeune Afrique (p58 à 61), M. Frédéric Corbière, responsable des relations presse à la Société de distribution africaine présidée par Philippe de Moerloose, nous a communiqué la réaction suivante.

"Contrairement à ce qui est écrit dans votre article, Philippe de Moerloose n’a pas de liens spécifiques avec le président de la RD Congo. Comme d’autres hommes d'affaires présents dans ce pays, il a déjà rencontré le président Joseph Kabila au Palais de la Nation dans le cadre d’audiences officielles.

Les allégations selon lesquelles Philippe de Moerloose réglerait certains détails des séjours bruxellois de l’épouse du président Joseph Kabila sont également non fondées."

Les Belges au Congo : prospères dynasties d'affaires