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July 14, 2009

Hedgehog Issue 12

By Spear's

From why you should divorce now to the true wisdom of financiers, from China to the Alps via Highgrove, it’s all in Hedgehog

Hedgehog is sponsored by Schroders Private Banking

Divorce Now!
The jury is out in private client legal circles about whether now is a good or a bad time for high-net-worths to get divorced. The Myerson case has become an example of how timing the filing of divorce papers is critical.

Brian Myerson, who is the former CEO of Principle Capital Holdings, was attempting to reduce retrospectively the settlement he came to with his ex-wife last year. Then worth £25.8 million, his fortune is distinctly less fortunate. He lost: his wife is entitled to the sum as was, not as is.

On the one hand, lawyers argue that since property prices have slumped and company asset values have generally sulked, the best possible time to file one’s Form E, which requires full and frank financial disclosure of all assets, onshore and offshore, is now.

On the other hand, should you be required by a court to sell your £10 million stucco mansion in Holland Park Villas, you might end up taking a painful financial hit.

According to Katharine Landells, a family solicitor at Withers, the ‘split sooner rather than later’ camp may have more going for it: ‘There’s never a good time to get divorced, but if you’re a husband with an entrepreneurial bent and you’re willing to take a bet on yourself, now’s a pretty good time to get divorced.’

The bet is that you can give away half your diminished fortune now but then bounce back later on. It requires a long-term view but is attractive: give away half of little now rather than half of a lot later. ‘Getting a divorce when you’re poor is better than getting one when you’re rich, if you have got the expectation of earning more,’ says Landells.

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Landells is clear that it’s not her job to encourage divorces, but from a dispassionate financial point of view, she agrees that it might be time to start reaching for the decree nisi.

Ibiza, Ubiza, Webiza
Patrice Gouty, founder of Chinawhite and homme du jour of London’s nocturnal club world after the glitzy revival of Raffles on the Kings Road, is about to take the Raffles brand international. The same strategy is being adopted by others such as Matt Hermer, the owner of Boujis, who has plans to open a Boujis in China.

In August Raffles is launching a VIP beach bar in Ibiza, called the Society Bar, in conjunction with celebrity events firm the Society, Jalouse night club and other London clubs.

Gouty has long wished to open a summer club in Ibiza. After the new Raffles took off, he was approached
by the founders of the Society, whose board now consists of Patrice himself, Dudley Spencer, owner of the London League PR and events company, and the well-connected club promoter Ed Taylor, about the possibility of a collaboration.

‘People will come to the beach bar first,’ says Patrice, ‘where they will eat, drink and dance in a stylish private venue, and after will be taken by chauffeur to the VIP clubs where the best table will be waiting for them.’

Each club will have the beach bar for a week each starting on 15 August, and then the final week — the first in September — will be when all the clubs will share the venue. Will anybody be able to afford it? ‘Some people will pay — others won’t,’ admits Patrice (so the celebs won’t be getting a bill). Weekend packages — flying out on Thursday night and returning Monday evening — to the bar, including food, drinks, chauffeurs and access to the best clubs and bars, will cost around £5,000 for a weekend.

‘I know we are in a recession and we are not out of the woods yet,’ Patrice says. ‘Instead of taking off a month, people will be taking off long weekends, I think, and they will want the best. We are trying to show a united front of the best clubs in London travelling to Ibiza. We will be flying out our top VIP members, celebrities and guests.
‘We have put together a deal with DJs like Pete Tong and he will be flying out in his private jet with VIPs to have dinner there. We will definitely have the young London society crowd out in Ibiza.’

One thing is certain, however. ‘This summer will not be the time for spraying magnums of Cristal all over the place,’ says Patrice. ‘That I can promise you.’

Spread ‘Em
Volatility may wreak havoc on your pension but it adds an edge to spread-betting. When you’ve wagered the equivalent of a month’s worth of restaurant bills on whether Big Pharma will catch a cold or an aeronautical firm will get off the ground, life takes on an addictive spice.

For those who enjoy the spice of betting but not the fiddly paperwork that comes with it, ETX Capital provides the solution: execution-only spread-betting and CFDs, taking the hassle out of high stakes.

Andrew Edwards, managing director of ETX, says that when the company started, it offered ‘spread-betting on commodities, equities, bonds, FX indices and interest rates’. Now they will quote you a price on any instrument.

Sensibly, for those who do not know their CFDs from CDOs or CDSs, ETX offers three levels of account: green, ‘which focuses on education’, says Edwards, offering a web platform, mandatory stop-losses and a practice account; silver, for those in the retail business moving on to the professional side; and black, with a dedicated account manager and a telephone platform, for those who understand that black is the new gold. The black account provides the simplicity that people value in private banking.

Black is not even just for the financier placing personal bets, says Edwards. ‘We work very closely with family offices: they will trade through us and the office will be doing all the back-office work and reconciliation.’

Because ETX knows that any true financier cannot go without knowing the latest shudder in the markets or needing to see how their portfolio is doing at a moment’s notice, they offer a text service too. ‘OMG thts gr8,’ as they say.

Cuban Cigars? In Cigars?
We have to give credit to Ranald Macdonald, the brain behind the Boisdale bar and restaurant in Belgravia, which combines the style of its Scottish heritage with the swing of the cigars and jazz of Havana and the sophistication of the London finance set who occupy the tartan-upholstered chairs.

Ranald, who reports that Boisdale is faring better than ever (‘We’ve never been fashionable so we’re not going out of fashion’), has what seems like a curiously counterintuitive yet actually terribly logical notion: he’s hoping to open a branch of Boisdale in Havana later this year.

‘We’re looking very seriously at a site in Havana,’ says Ranald. ‘There’s a strong expat community, a growing Cuban middle class and there are a lot of tourists, particularly from Canada and Latin America, who adore whisky.’ Someone has finally discovered selling cigars to the Cubans, as the saying doesn’t quite go.

Thought for the Quarter
‘It is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God.’ This is not a motto we subscribe to. It’s lucky, then, that there is Thought of the Week from Hasley Investment Management, a short essay on a financial theme available on its website.

The best of recent months include a contrast between Darling and Disraeli, a plan for Parliamentary reform and a look back at the Great Depression, all designed to reach parts of the financier’s brain other thoughts can’t reach.
Hedgehog’s thought for the quarter: ‘If a rich man is proud of his wealth, he should not be praised until it is known how he employs it.’ Courtesy: Socrates, who knew a few things.

Les Alpes, Elle M’Appellent
Our friends at Scorpio Partnership have made a definitive determination: the mobile international wealthy apparently prefer Switzerland to Swtizerland-on-Thames.

In their Mobile Wealthy Residence Index, Switzerland came top of almost every category, from economic and political stability to sophistication, culture and infrastructure. Given that in this category Monaco came second, ahead of New York in third and London in sixth, which was just ahead of Jersey, one can perhaps assume that the sophistication and culture parts were not what weighed most heavily.

For an analysis of the Alpine champion’s future (let’s just say the prospects for Le Rosey are looking less rosy), see Suisse and Sour.

Bund Bound
Eagle versus dragon sounds like a mythological contest, although the financiers of America and China
may not be finding it such a fairytale. Economically, China is powering ahead of America: even though its GDP, at $4.4 trillion, is three times smaller than America’s, its growth from 2007 to 2008 was 30 per cent, nine times America’s.

Now Shanghai is even gaining one of New York’s crown jewels: a Peninsula hotel. It’s Fifth Avenue against
the Bund. Fifth Avenue may boast Museum Mile, but for businessmen, the Bund — century-old home to global financial institutions and financial centre in a nascent superpower — is the draw.

Since the Chinese government indicated that it wanted Shanghai to become a rival to London and New York, its financiers have been making this happen.

The Bund’s main development came in the Twenties and Thirties, which explains the prevalence of Art Deco masterpieces: No 32 houses the Peninsula Shanghai, with its 235 rooms and five restaurants, ranging from Cantonese to French. The hotel combines traditional local inspiration and history — the Salon de Ning is modelled on a private residence’s drawing room and there is an Aviation Lounge — with the classic style of the group, with the Peninsula Afternoon Tea finding a new home.

Opens autumn 2009

Ice, Ice, Baby
What’s cool is hot and what cold is even hotter, according to the information which just landed in our inbox: ‘Land investment in Iceland represents unprecedentedly good value right now.’

One wonders why. The area — Tjarnabuggd farm village in south-west Iceland — has hot water from geysers, cold water from springs, the Northern Lights for entertainment, and hopefully armed guards to keep away the (so far peaceful) civil unrest.

No one could have a reasonable objection in principle to Iceland — we’re supposed to be getting back to nature (though flying there every other weekend can’t help global warming) — but its valueless currency and effective bankruptcy are hardly inducements.

For the moment, Hedgehog’s Icelandic property portfolio is being kept in the deep freeze.

Private and Equitable
In the league of disliked professions, private equity is somewhere down there with journalists and politicians (who of late may well have increased their lead). The image of asset-strippers is somewhat reminiscent of grave-robbers, which is why Impetus, a charity which unites PE money and expertise with needy charities and the UK pioneer of venture philanthropy, is not just a refreshing change of image but a change of aim, too.

Stephen Dawson, non-executive chairman of ECI and co-founder and chairman of Impetus, is very clear on how PE and venture capital theories affect Impetus’ aim: in applying their business standards to charities’ development, ‘we want to have a social return on our investment,’ he says. The money is not string-free or lump-sum, which can be ruinous: its quarterly disbursement is dependent on progress through milestones such as production of business plans.

When Stephen founded Impetus — along with Nat Sloane — he was inspired by the American venture-philanthropy model and the increased availability of his own spare time after his retirement from ECI.

By uniting professionals from firms such as OC&C and KPMG with charities, in a similar way to Pilotlight (featured in Spear’s issue 10), Impetus creates sustainable development, although it also brings money. Its portfolio charities include the reoffending reduction group St Giles Trust and Leap, which works on preventing violence among the young.

It has proved a popular idea with his peers: in the original funding round for Impetus, Apax’s Peter Englander, Sir Ronald Cohen and Adrian Beecroft, as well as Guy Hands, all contributed, and it has relationships either corporate or individual with HG Capital, Isis and Bridgepoint, among others. Impetus is putting the equitable back into PE.

Stirling Work
It is good to hear from someone in the private equity industry who isn’t a first cousin of Cassandra. Martin Calderbank, a partner in Stirling Square Capital Partners, a mid-market firm whose investments (average €50 million) cover most of Europe, is positive about the prospects for private equity — but with a condition. ‘If we are successful in private equity, it is because we are lucky to work with excellent managers, bankers and advisers.’

He combines this knowledge with an awareness of the sea-change in private equity: ‘Bluntly, if private equity makes sense as an industry, and I think it does, then generous stapled finance, provided to any and all investors, made no sense at all. The days of generous stapled finance are over, and I welcome that.’

For firms such as Stirling Square, it is goodbye to profligate gearing and hello to strong fundamentals.

Floral Revival
There is a style to much of what HRH the Prince of Wales does: from his Duchy Originals (with their indispensable lemon refresher and ginger biscuits) to his Prince’s Trust charity for young people, his interests are carried off with élan and expertise.

His latest project is no different as he finds himself in the vanguard of a revival of an ancient tradition, this time centred around his pride and joy, his garden at Highgrove.

This cultural/charitable endeavour is the recultivation of a lost species, the florilegium. For those not horticulturally inclined, a florilegium is a book of botanical drawings, illustrations and engravings covering the flora of one estate or area, in this case Highgrove. Florilegia combine the best aspects of art, science and old-fashioned printing and book-binding.

By their nature, they are lavish productions, says Henrietta Pearson of Addison Publications, the company responsible for the Highgrove Florilegium: if you want one produced for your garden or estate, it is eminently possible but ‘you’re talking hundreds, not tens, of thousands of pounds.’

The Highgrove Florilegium is published in two volumes in an edition of 175, at £10,950, and it is a product of the best design, craftsmanship and production Britain has to offer, with everything from hand-binding in Halifax to goatskin leathers from Edinburgh. The profits go to the Prince’s Charities Foundation, uniting his passions for nature and charity.

Over a hundred have already been sold, so get out your chequebook soon to avoid fishing around on eBay.
The standard of illustration was such that 70 per cent of those submitted were rejected, even with a wealth of talented botanical artists out there. Richard Shirley-Smith, one of Britain’s foremost illustrators, produced line drawings and engravings for the endpapers (including the folly below) and he even reworked the design of the Prince’s Fleur de Lys on the binding.

It might not be within every Spear’s reader’s budget but we’re delighted to shortlist the Highgrove Florilegium for the Spear’s Book Awards on 30 June.

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