Elevator XVIII by Patrick Gruhn

P r i vat e E q u i t y a n d m o r e

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Editor’s letter

Dear Readers,

See Patrick’s opinion on Japan on Page 34

Over the last few weeks I’ve been asked time and time again what kind of benefits investors can draw from recent catastrophic events such as the earthquake in Japan or the militant uprisings in the numerous Arab countries. My response has always been the same, especially regarding Japan. One should not profit from the hardship of others. Sure, there is money to be made in the drop of the Yen or with the rebuilding of the infrastructure in Japan or the speculation of the spike of the oil price, but is that really ethical? Isn’t that like watching your neighbor’s house burn and selling him your fire extinguisher at a profit? If we look back at the recent financial crisis, how speculators largely contributed to the bottomless drop of shares with over-selling stocks, it stands to reason that we would not have had to endure such an accentuated global economic crisis if it wasn’t for the extension of profits of a few speculators. In our modern age, as business becomes more and more connected and evolution is exponential, opportunities arise at a high frequency; but the process of evolution should also entail the bettering of human ethics. Hence, it is my opinion that we should all be more responsible and act in a way that can generate sustainable profits for all rather than create fast fortunes and watch others crash and burn while we sip our cocktails on a sandy beach. In that sense, I wish you all much success with your ventures and investments over the summer! G. Patrick Gruhn Editor, Elevator Magazine

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featured contributors Matt crofton

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With a combined career in journalism and property search Matt is a contributor in demand and somehow manages to juggle the two. Matt is a regular contributor to wealth management magazines on a breadth of subjects.

Following a successful career in the music industry Lindsey moved into the world of freelance journalism and is a regular contributor in the national press on a range of subjects from the media industry to music industry talent.

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disclaimer The contents of this printed or online magazine edition, pdf or digital version, web site, web page, and/or any other communications, correspondence, messages, broadcasts, advertisements, media and publications from or on behalf of The Elevator, HEPT Media Ltd., Luxium Associates, LLC and/or any and all of their respective officers, members, representatives, agents, directors, employees and affiliates (collectively, all of the foregoing are hereinafter sometimes referred to as “The Elevator”), are intended solely for information purposes. Statements made by the various authors, site users (if applicable) and other contributors do not necessarily reflect the opinions of The Elevator (in whatever form) and should not be construed as a solicitation, endorsement, agreement or approval by The Elevator, either expressed or implied. The Elevator is not responsible for typographic errors or mistakes. All information and materials are provided “AS ISWHERE IS” without any warranty of any kind or nature. The Elevator reserves the right to modify any product or service information contained in our printed or online magazine editions, web site, web page, pdf or digital versions or in any other publication or medium, without notifying current or prospective subscribers or customers. In no event will The Elevator be held liable for any indirect, special, incidental or consequential damages arising out of the use of, or payments based on, the information contained in any of our publications. The Elevator makes no representations whatsoever about any media or publications which you may access from or be based on our printed or online magazine editions, pdf or digital versions, web site, web page and/or any of our other publications, and neither endorses nor accepts any responsibility for the content or use of such content. Any comments, materials or registration information provided to The Elevator, including feedback, such as questions,

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Things are not always what they seem

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Crunch Time in Europe

Rob Powell takes a look at the state of the EU following recent financial turmoil

Iraqâ&#x20AC;&#x2122;s awakening

Iraq is gearing up for its emergence as a very real economic force in the middle east

Hand, set and match

Is Stephen Elop facing an impossible task at Nokia as the telecoms giant plays catch up?

21st century mad men

Lindsey Whitton takes a look at how the advertising industry is coping with the new media onslaught and where the future lies for the modern day Mad Men

the great bulgari buyout

LVMHs controversial takeover of Bulgari has raised a few eyebrows, but what caused the French giants to swoop so quickly?

business capital

The eyes of the world will be on Brazil over the next 5 years and we take a look at why the future is looking very bright for Rio de Janeiro

firstPEX

We take an an in-depth look at one of the most promising online ventures we have seen in years.

banking on recovery

David Thurlow discusses the current difficulties of funding for small businesses in the UK

cityboy: the next chapter

Geraint Anderson (AKA CityBoy) talks to Rob Grainger about his transormation from city analyst to best-selling author

Complete protection

Mowbray Jackson looks beyond traditional wealth preservation and into the business of private security companies

Swiss Buying Guide

Elevator editor, Patrick Gruhn, offers some well considered advice on the intricacies of buying property in Switzerland

inside: Profiles and information on companies currently seeking investment

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news in pictures Pictured left. The US Postal Service regrets issuing a stamp featuring a photo of a Las Vegas casinoâ&#x20AC;&#x2122;s replica Statue of Liberty rather than the original in New York harbour. For clarity, hereâ&#x20AC;&#x2122;s the real lady herself. Pictured below. Sepp Blatter hangs on to his Presidency at FIFA to the surprise of many, despite persistent rumours of corruption and bribery.

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news in pictures Pictured below: One year on and marine biologists are optimistic about the eco-recovery process in The Gulf as fishermen report record catches, although itâ&#x20AC;&#x2122;ll be many years before we see the full effects of Deep Water Horizon. Below left: The clean-up operation in Miyagi, Japan, continues as the country starts to rebuild. Below right: Welcome support as President Obama sees approval ratings fall in the battle for middle America.

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Crunch Time in Europe Rob Powell takes a look at Euro bailouts and the legacy left by a global recession

The European sovereign debt crisis has rarely been out of the news over the last 12 months, with ongoing debate and speculation rife as to which European states are most vulnerable, who should be responsible for bailout funding and whether we’ll see any serious medium term damage to even the strongest member state economies. Many European countries enjoyed significant growth during times of economic prosperity, but it’s becoming clear that some among us were perhaps a little short sighted. But should we all shoulder the responsibility for negligent fiscal planning? As a taxpayer in the UK I’d say yes. We’re a nation that has narrowly avoided bankruptcy on more than one occasion in the past and gratefully accepted bailout packages from our friends across the Atlantic. Things are looking decidedly precarious again here, and we’re not alone in that respect. It’s widely accepted that more countries will need the support of their European neighbours and it’s more important now than ever that the EU holds together and retains the support of all member nations and their populations. Brussels has a PR battle on its hands, but if we can pull through then this will undoubtedly make the EU stronger than ever. The alternative is a weakened economic coalition with little strength and divided support. I suspect the spin doctors of Brussels will be chewing their nails over the forthcoming summer period as the lending spreads across Europe’s weaker economies, leaving those taxpayers behind the lending feeling aggrieved and restless. The main areas of concern in early 2010 had revolved around the unfortunately titled PIGS nations (Portugal, Ireland, Greece and Spain). Ireland had a government deficit of 14.3% of GDP at the time Greece’s rescue package was announced, with Spain at 11.2% and Portugal at 9.4%. The worrying statistic that’s missing here is Europe’s second largest economy, the UK, with a deficit of 12.6% GDP and a ballooning national debt approaching £1trillion. Add to this an election resulting in a hung parliament and a forced coalition government, rising unemployment and the realization that Iceland will not be

paying any compensation to the UK for the failure of it’s three largest banks. It would be fair to say that the UK economy is in very poor shape indeed. Maybe we should be talking about the PIGSUK nations? Let’s spread the net further, as it appears that Belgium and Italy are both faced with national debts beyond 100% of GDP. The Baltic States (Estonia, Lithuania and Latvia) have all seen unemployment figures treble since 2008 with over 20% of the work age population being unemployed. Slovenia and the Netherlands both look like real cause for concern and the list goes on. In the UK we’ve witnessed a very clear shift in voters’ attitudes towards the EU. Our right wing tabloid press whips up frenzied indignation with stories of hardworking taxpayers’ money being used to prop up our continental neighbours whilst we struggle to bridge the state pension deficits and fund our own hospitals. The truth is that the UK needs Europe more than ever as we can no longer rely on the financial support of our American cousins. At a recent charity lunch in Paris a senior EU Parliamentary lobbyist was overheard saying that if he were a taxpayer living in Germany, France or Sweden right now he’d be having serious reservations about the potential for further bailout funding in the second half of 2011. In fact he’d be lobbying his government for a very discreet, but rapid exit from Brussels through the nearest side door. This, in my view, highlights the very real and dangerous potential for a de-stabilising of the EU. Euro skepticism is growing and should not be under-estimated. One thing the credit-crunch and ensuing global recession has very clearly shown us is that the EU has a powerful, valuable and necessary role to play in modern world economics. It’s hard to imagine where many European countries would be without the collective support and guidance of the remaining member nations. Whether we agree with the social and political togetherness of the EU is now firmly a sideline issue, while the more serious debate around the benefits of combined economic power and stability has taken centre stage. For those uninterested in the consequences of a potential fragmentation of

“Many European countries enjoyed significant growth during times of economic prosperity, but it’s becoming clear that some among us were perhaps a little short sighted. Should we all shoulder the responsibility for negligent fiscal planning?”

the EU, or those simply interested in a short term gain, I can recommend a glance at the betting odds given by PaddyPower for next to receive n EU bailout: Spain 6/5 Italy 7/2 Belgium 5/1 Estonia 8/1 Slovakia 10/1 Slovenia 10/1 Malta 14/1 Luxembourg 25/1 And the odds for first to leave the EU: Greece 5/2 Portugal 11/4 Germany 9/2 Ireland 11/2 Spain 6/1 Italy 8/1 Belgium 10/1 France 10/1 I think those of us with a vested interest in the future of Europe should perhaps invest a little more time ingratiating ourselves with our German friends. Rob Powell is a financial journalist and broadcaster

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It’s becoming evident that the EU is increasing its reliance and pressure on Germany as the leading economic state. Should Germany be considering an exit from the EU?

Michael Dawson

joseph tang

PATRICK GRUHN

Analyst, Drago Capital

Private Investor, (Since 1981)

Editor, Elevator Magazine.

Germany is in a powerful position and if it plays its hand well we could see it taking greater control of the EU in the longer term.

Germany is caught between a rock and a very hard place. An exit from the EU is likely to create a huge strain on economic relations with the remaining EU countries. I would expect Germany to play ball, stay put and leverage its position to gain even greater power within Europe.

Germany has been the economic engine of Europe for decades, leading the charts with its strong exports and “floating the bill” for too long. Surely the German population will contemplate a change? In my opinion it is not likely that a change will occur any time soon. Too few people understand the real problems and those who understand them have most likely come to terms with them. The issues have to become more of a challenge to the general public in order for politicians to make a drastic move. Compared to countries like the USA, the European economy is much healthier.

There’s potential for bad PR at a time when the EU needs the support of its member nations’ electorates. Should the EU be treading carefully with the current application for member status by Iceland?

The Icelandic government made common mistakes, but should not be ostracized on this basis. The EU needs to grow and excluding potential member states would show weakness.

Iceland has refused to compensate other EU members for their losses caused by the crash of its banks. This is a delicate issue for the politicians involved but it would be unwise not to consider the longer term benefits to the EU as a whole.

Iceland has fallen victim to the economic meltdown more than any other nation, proportionately speaking, and an admission into the EU should clearly reflect its economic status in order to avoid weighing down other members. From my point of view the union should most definitely tread lightly because weakness doesn’t help in the creation of a healthy alliance. Then again, other countries such as Greece should be excluded due to its failure to comply with financial benchmarks set out for all member states. It is all very murky but then again, Europe is certainly “too big to fail”.

Has the UK been justified in its stance of not adopting the common currency, or would overall damage to the UK have been lessened had the Euro been adopted?

The UK has always had issues with becoming fully European and will argue that protecting its own currency has been fundamental in balancing the credit crisis. It’s doubtful that adopting the Euro would have lessened the damage, but it may make Britain’s politicians reconsider their stance.

The UK adopting the Euro at some point is inevitable if it wants to continue to retain this level of influence. Regardless of whether it would have been worse or better off , it makes good sense for the UK to join a common currency for the greater stability of all member nations.

Staying out of the monetary union is a tricky thing as it doesn’t facilitate trade. But the UK has always been an island nation and it doesn’t seem to have hurt the nation’s economy to stay on its own course, considering the state of the Eurozone at present.

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DATA

Iraq is gearing up to show how well it can cope with a more capitalist and democratic regime.

Iraq’s Awakening Following years of conflict and political upheaval Iraq is finally generating very real opportunities for serious investors. Are we seeing the emergence of a powerful new economy?

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Capital: Baghdad President: Jalal Talabani Prime Minister: Nouri al-Maliki Language: Arabic Population: 31.4m (estimated) GDP: $111.5b Per capita: $3,570 Currency: Iraqi Dinar Exchange Rate: 1000IQD=0.8507USD Airport: Baghdad, Basra Carriers: Gulf Air (via Bahrain) Dokan Air (via Munich) Where to stay: Sheraton Montazah Radisson Blu, Alexandria Hilton, Alexandria Maritim Jolie Ville Hotel, Alexandria

INVESTMENT

Few could argue the historical importance of Iraq. Let’s not forget that this is the country that spawned modern civilization and gave us writing, the wheel and counting systems amongst other notable achievements. More recently the country has suffered considerably due to conflict and last year saw the mass withdrawal of coalition troops with the US remaining in an advisory role until December 2011. In post-conflict Iraq we’re seeing a rapid settling of the political landscape. Doubtless there will remain a level of corruption within the new political structure and potential investors should proceed with all the necessary caution and due diligence, but the opportunities certainly do exist. This was recently shown to be the case when Citigroup cited Iraq as sixth on the list of predicted Global Growth Generators, with growth at 6.1%, only marginally behind India at 6.4%. Iraq’s economy has been, and will continue to be, primarily built around its oil reserves, which have historically provided 95% of foreign exchange earnings. It still has proven reserves in excess of 143billion barrels, although concerns have been raised over the proximity of the evervolatile Iranian border to many of these key fields. As with many singularly dependent economies, there is always an underlying risk. That aside, it’s fair to assume that if

you do your homework you’ll identify the volume of opportunity that surrounds the oil business wherever it goes. We’re seeing the arrival of many international corporations to the region as well as the emergence of new businesses geared at servicing these, from small single-route airlines (London-Baghdad) to construction, security and insurance operations. Beyond this there are a whole host of potential retail opportunities as we see the country become not only more stable, but create a more international business community, which will bring with it wealth. This is a country the US Department of Commerce seems to be taking very seriously, as their recent seminars in conjunction with JP Morgan have demonstrated. If you take a purely instinctive approach to Iraq as a potential business investment, then the opportunities stack up impressively well. Here we have a more settled post-conflict economy showing signs of significant growth, an oil industry that is being rebuilt and that has huge reserves. Overseas corporations investing, frequently with the aid of their own governments. A strong construction industry and a flexible and welcoming political structure ready to embrace foreign investment. There are gains to be made here for those willing to conduct thorough research, and I can see a welldeserved bright future for people of Iraq.

The outside world is quickly taking advantage of the new era in Iraq.

Chinese machinery manufacturers have been very active in recent years. Chinese business is less risk averse than others and their activity in Iraq has proved very lucrative as the country has become Iraq’s second largest trade partner. China is likely to overtake the USA at current growth rates Romanian and Lebanese businesses are leading the way in revenue share deals with state-owned cement production, vital for continued rebuilding of infrastructure Carrefour’s regional franchisee MAF Group has been busy setting up Carrefour-branded retail outlets

Here’s all the things you need to make informed investment decisions. Here’s how to get to where you’re going. Take the Elevator.

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Hand, Set and Match Stephen Elop took over the reigns at Nokia in September 2010 and many have been predicting a rough ride for the new CEO. Elevator takes a look at what he’s been up against during his tenure so far. Nokia has been a giant in the mobile handset market for as long as the market has existed. They’ve enjoyed an unprecedented level of consumer loyalty in the past, particularly in the Far East, but then along came the smartphone revolution and many feel that Nokia were very much caught out. The share price has been falling, despite the arrival of the new CEO and the recent deal with Microsoft, but it would be short-sighted to underestimate the potential recovery of this giant corporation. Does the CEO of the world’s eighth most valuable brand have enough in his locker to bring the share price back? Stephen Elop was born in Ancaster, Ontario in 1963 and graduated with a BA in Computer Engineering & Management from McMaster University, Ontario in 1986. He was a director of consulting at Lotus Development before stepping up to CIO for Boston Chicken Inc, the convenience food manufacturer. A move to Macromedia in 1998 set Elop well and truly on his path towards where he sits today. He became Macromedia’s CEO in January 2005 and oversaw the acquisition by Adobe just three months later. During his time at Macromedia, Elop is credited with pushing the business to get Flash software onto mobile devices, a smart move as Adobe have since discovered. Elop resigned from Adobe in the summer of 2006 and after some time out he joined Juniper Networks as COO in January 2007, where he stayed for 12 months. Until this stage Elop’s career had been successful, but a series of short tenures (by board-level standard) would appear dubious on any CV. Microsoft clearly saw his talents and enticed him from Juniper to head-up their Business Division, responsible for Microsoft’s Office products amongst others. Those who’ve worked for Elop will say that he is a hard working and serious man. He’ll need to be if he plans to successfully renegotiate Nokia’s position in the handset market. To understand the potentially tricky position Nokia have found themselves

“Shareholders in Nokia have had every right in recent years to voice their concerns. Nokia is losing ground to far eastern manufacturers in the low cost market and has been slow out of the traps for the smartphone revolution.” in, we need to look at what’s happened in this market in recent years and how Nokia have reacted. In the earlier boom days of mass market mobile communications Nokia products were dominant. Few people over the age of 30 could say that they’ve never owned a Nokia product and from the midnineties until Apple stepped into the market in January 2007 with their iPhone, it was hard to imagine anyone eroding Nokia’s market share quite so quickly. What we have seen during the last four years is an almost explosive expansion in smartphone technology, more credible mobile internet and the emergence of apps. Apple, Motorola, Samsung, RIM (Blackberry) and HTC have all invested heavily in smartphone products and Google’s increasing interest is likely to make things even harder for Nokia. Shareholders in Nokia have had every right in recent years to voice their concerns. Nokia is losing ground to far eastern manufacturers in the low cost market and has been slow out of the traps for the smartphone revolution. It seems unlikely it can hold a minor position in both ends of the market, and the middle ground seems precarious. It would have taken a brave investor to put their money into Nokia last summer at a time when the company seemed to have little in the way of a plan. The slow reaction of Nokia to a changing market caused a decline in their share values which have yet to recover and even now stand at 45% below the valuation in early 2010. On the surface this looks bleak for Nokia, but we’d be inclined not to bet against

them. Who’s to say the technology is now mature? Does Nokia’s brand still have the same strength, despite the arrival of more fierce competition? One of Elop’s first, and perhaps most crucial, moves has been the alliance with Microsoft. Many in the tech industry have been skeptical about this, but take a look at the facts. The OVI and Symbian systems Nokia were entirely reliant on weren’t appealing to consumers faced with the Apple and Android options. Nokia needed to move quickly, create a niche and grow their share. Whether it was a good long-term strategy or not will remain to be seen, but Microsoft is undoubtedly the perfect partner and Elop’s arrival at Nokia is starting to make a lot of sense. From a risk wary standpoint we’d be inclined to hang on and watch the share price as many analysts feel there could be further falls before recovery. Early feedback from within the industry has pointed to a less than favourable set of Q1 results for Nokia this year, and share values will undoubtedly take a further hit. It could well be worth bookmarking this as one to watch for the next few months as Elop is clearly a man on a longer term mission. Nokia’s share price closed at $8.35 on 25th March 2011, from $15.42 in March 2010. Many believe the company could now be undervalued and with a CEO who has a track record of predicting technology, and the potential for Nokia and Microsoft to enter the tablet market, who’s to say that this won’t be a great few years for the Finnish giants?

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Is Stephen Elop the man to turn the tide at Nokia?

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Tidjane Thiam Having taken over as CEO of Prudential in March 2009, Thiam became best known as the first black CEO of a FTSE 100 listed company, although he’d much prefer not to wear this unnecessary label. Tidjane Thiam has been a CEO under pressure over the last 12 months. He faced calls for his departure following the collapse of Prudential’s $35.5 billion bid for AIA last June, but has weathered the storm admirably – at a cost. His 2010 bonus will now be paid in deferred shares, rather than the expected 50% in cash, but this is likely to be of lesser concern to a man eager to keep his chair. Let’s not let the failed AIA bid cloud our view as Prudential, Britain’s largest insurers, saw an overall increase of 4.3% on their share price during 2010, which significantly out-performs the industry average for this sector of 1.9%. At 48, Thiam is relatively young in comparison to many of his industry counterparts, but few would question his credentials. He was born the youngest of seven children in Ivory Coast and from intriguing stock. His mother was the niece of a former president and his father a journalist, later a diplomat. He joined management consultants McKinsey in 1986 before being coaxed back to Ivory Coast by then president, Henri Konan Bedie, to take control of domestic infrastructure projects. He went on to become Minister for Planning and Development,

Weathering storms is water off a duck’s back for Tidjane Thiam

but his outspoken attitude to corruption had made him increasingly unpopular amongst colleagues. The Ivorian government was overthrown at the end of 1999 whilse he was out of the country, but Thiam returned at considerable personal risk to ensure the safety of his staff and colleagues. The new government offered him a position, which he

declined, and he left to rejoin McKinsey before finally arriving at Aviva, formerly Norwich Union, in 2002. Thiam then moved to Prudential in 2008 as Financial Director and within 12 months had been appointed CEO. He’s admired for his no-nonsense and straight-talking approach and has created a rare loyalty around him in a remarkably short space of time.

Brokerage joint venture Morgan Stanley Smith Barney has hired Jeff Hack from JP Morgan Chase as its chief operating officer.

Nomura Holdings has appointed Junko Kakagawa as its new CFO. Kakagawa becomes the first female senior executive within the business and hers is a significant appointment within Tokyo’s male dominated financial industry.

movements of shakers

PWC has announced the appointment of Amit Aggarwal to lead the retail M&A team within their corporate finance business.

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21st Century Mad Men The advertising industry has seen some turbulent times over the last decade and the industry has been forced to change. But have investors fallen out of love with the Mad Men dream?

The golden age of advertising appears to be a distant memory now as the global media giants continue to gobble up the small fish around them. Investors shy away from media stocks, and with good reason. The halo has figuratively slipped and the advertising industry has been accused of failing to keep track of new technologies and being too slow to react. Client loyalty isn’t what it used to be and retaining business has become a priority over new business. It seems that retaining market share and standing still has become the goal for many large agencies. But what happened to change this industry so much over the last decade, and is this a sector investors should be looking at more closely? Twenty years ago the landscape was very different. There were fewer TV channels and radio stations, the world of press and outdoor advertising was much simpler and, of course, we were yet to see the rise of the internet, social media and more sophisticated product placement. Those were heady days indeed and the average ad agency could operate a relatively unsophisticated business (by today’s standards) with specialists in press, outdoor and radio. There will always be a need for advertising and marketing, but today’s consumer is more sophisticated and less

easy to manipulate. The modern day Mad Men need to work a lot harder for their commission, which undoubtedly affects their own bottom line. The summer of 2001 was a buoyant time for the media world, I know because I was there and had been enjoying a healthy expense account and a fat pay packet for years. Times were good and the Mad Men were still making hay, oblivious to what was about to happen. The first hit to the industry was the 9/11 attacks in New York. The world changed in a matter of minutes. Airlines grounded their fleets, the travel industry shut down and the after-effects hit the ad agencies hard as big travel clients pulled budgets. The ripple effect into other industry budgets was noticeable and suddenly the mediaowners were struggling to fill airtime slots and press pages. The recovery was slow, but the damage had been done in that media-owners were forced to discount ad space and advertising started to get less expensive. We then saw online advertising quickly start to erode traditional press and TV budgets and now agencies had to set up specialized in-house departments for the online boom. The budgets weren’t increased, they were simply spread more thinly and the work got harder. As the industry began to recover we saw a

“The summer of 2001 was a buoyant time for the media world, I know because I was there and had been enjoying a healthy expense account and a fat pay packet for years. Times were good and the Mad Men were still making hay, oblivious to what was about to happen.” further need for diversification of skill with the rise of viral marketing and social media, and an increase in cable and online TV stations, as well as a rise in the number of radio stations as a result of digital and internet radio. More recently we’ve seen the rise of specialist mobile media with smartphones and now portable tablet devices. The upshot of this is that ad agencies now need more in-house expertise, more specialist departments and an even greater research resource, and all of this

industry tracker The industry recovery is slow as we start to see more fragmentation in ad budgets and greater choice in media. Online ad spend continues to increase but overall budgets are static.

The travel industry shuts down as the after-effects of 9/11 cause a massive reduction in global ad spend.

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for the same client budgets. The result has been an industry with fewer global players. We now see the giants eating up the smaller fish as their need for specialists increases. You only need to look at the sheer volume of global acquisitions by WPP, Havas, Aegis, Omnicon and IPG in recent years to understand this. WPP have taken the most aggressive acquisition strategy and the scale of their global operation, headed by Sir Martin Sorrell, is huge with around 150,000 staff in 110 countries. With a stock market valuation of $8billion and

annual billings over $60billion, they are a vast corporation. As we slowly exit a turbulent global recession we’re starting to see a more fragmented media industry with more players on the field. Economic difficulty often brings out the very best in business and there’s room for optimism for the Mad Men left standing and holding onto their hats. They still face considerable threats from the increasingly dominant media owners (Google, Facebook etc) in the digital arena, but they’re starting to show us what they’re capable of – the ad

Sub-prime mortgages in the US send the world economy quickly into recession and advertising budgets are decimated, even in the perceived bulletproof luxury industry.

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world is rapidly catching up and offering more creative and engaging campaigns. Madison Avenue is starting to look like the centre of creativity it once was and the more streamlined agency groups have been hard at work pleasing their clients. It could well be time to start looking at media stocks again, particularly those in the advertising sector. It was perhaps inevitable that something had to give and for those with a medium to long-term view it could be time to re-ignite our past love affair with Don Draper et al. By Lindsey Whitton

A leaner and fitter ad industry begins to emerge as marketing spend starts to increase and the global ad agencies report healthier figures.

2009

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spotlight

The Next Big Thing: Apps Mobile apps have been with us for a couple of years now, but as the market begins to mature we’re starting to see some exciting opportunities. But where to begin?

“Imagine the world of app development is similar to that of the California Gold Rush of 1849. You have the prospectors looking for fast gains and you have the merchants selling picks and shovels.”

Apps have quickly established themselves as useful tools (and distractions) for our smartphones. The ball really got rolling with the introduction of the iPhone and app downloads being made available from Apple’s iTunes store. Although Android seems to be closing the gap in many areas, Apple continues to dominate the paid-for app download market. Essentially an app, or application, is a piece of software that can be downloaded to a smartphone or tablet device. It can then be accessed from a desktop screen and used as and when required. The app development industry can be separated into two camps: those who develop apps for clients and those who develop and release proprietary apps, although there is crossover. Imagine the world of app development is similar to that of the California Gold Rush of 1849. You have the prospectors looking for fast gains and you have the merchants selling picks and shovels. The prospectors

are, in the main, the game developers aiming to produce the next Angry Birds, whereas the merchants are those developers who are acting as facilitators. The gains can be considerable for both sides, but the risks are vastly different. The market is growing rapidly and it’s becoming increasingly difficult to get new releases noticed, so it’s worth factoring-in a sizeable marketing budget if the app in question is mass-market targeted. To date there have been almost 10 billion iPhone app downloads and rising, with over 350,000 apps available from the iTunes store. As the market has developed we’ve seen a greater variety of download products available, from magazines and newspapers to marketing gimmicks and local search apps, all offering convenience and content in the palm of our hands. Developers of the MouthOff app, UsTwo, have claimed revenues of over £100k in the first year of release, while the estimated

development cost of this app is around £10-£15k. It’s certainly a lucrative business for those who get it right, but at £0.59 per download for an app like MouthOff and a commission of 30% payable to Apple at source, you’d be looking for 250,000 paid-for downloads to achieve this level of return. Of course the developer can choose a higher price point, but like any business runs the risk of losing sales, so price-point is critical. The more successful apps are often free downloads or lite versions of paid-for apps. Many of these survive on advertising revenues that can be generated from a number of ad-serving networks. Apple’s own iAd network is gathering momentum, but download numbers would need to reach 1million and beyond in order to expect any sizeable revenues. It is also worth remembering that the ‘picks and shovels’ route might be a safer punt. There are many app development agencies out there seeing considerable growth and looking for suitable investors, so keep your ear to the ground as you could easily find a gem out there. If you do, then make sure you keep it to yourself – goldmining is, after all, a pretty confidential business. by Daniel White

SPOTLIGHT

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23 THE--ELEVATOR.COM

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Anyone for bubbles? For 25 years the Antique Wine Company has been guiding and supplying clients with the world’s finest wines. Whether it’s for your cellar or your portfolio, you may want to look them up.

Vintage wine is an area Elevator has looked at before and we make no apology for keeping a close eye on this intriguing market. In a similar way to art, fine wine is often seen as a solid investment in the medium to long term. The nagging question for any new investor in this market is whether there is an over-valuation at present. Much like the diamond market, it could easily lose value at an alarming rate should perceptions shift. So is the rising value of fine wines caused by pure speculation or more concrete market fundamentals? One thing’s for sure, like any aged product there is only a finite amount of stock available. This alone is reassurance enough for many investors. If you’re considering spreading your portfolio then it’s worth speaking to an expert in the fine wine industry. On paper the returns are considerable, particularly in

comparison to the stock market or property in recent years. The Antique Wine Company has an enviable reputation with over 17,000 clients spanning 67 countries. Its client services include sourcing rare wines, private master classes and cellar planning. The company’s principal offices are situated in London, with sales offices across Europe, USA and Asia. They also have strong relationships with chateau owners and wine producers across France, including Chateau Lafite. Guidance and advice is offered for the seasoned buyer or the novice whether you’re planning to buy, or sell. The advice offered is tailored to your needs, as many clients will be looking to purchase stocks for more than just investment purposes. It’s worth having an expert on hand when you’re looking to restock for your yacht or villa on Mustique; after all, none of us

want to make an unnecessary faux pas whilst entertaining his royal Excellency in Port Hercule. The Liv-ex platform has been tracking the trading patterns of 100 of the most sought after wines since 2004. In this time we’ve been seeing returns of around 30% year on year, with the exception of an understandable hiccup around the summer of 2008, but let’s not dwell too much more on that period. At these levels it’s easy to see why the wine market can be a useful diversion for many investors given that it has consistently out-performed many fixedincome indices. As always, it’s a case of risk versus reward and if you’re less worried about the risk then simply invest in a wine that you can at least enjoy from the deck of your yacht if the theoretical bubble bursts. Information at antique-wine.com

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The Great Bulgari Buyout The acquisition of Bulgari by the ever more powerful LVMH Group in March didn’t raise too many eyebrows at the time. But what made the French giants move so quickly after what seemed like a slow courtship?

LVMH has been the major player in the luxury industry long enough to understand a good acquisition, but was there more behind the speed of the Bulgari acquisition than meets the eye? Silvio Berlusconi has been considering legislation to keep strategic companies in Italian hands for some time and many believe this change in the law may not be far away. The Italians have long been associated with luxury goods from cars to fashion to yachting, but it appears Bulgari has crossed the French border, and perhaps LVMH got there just in time. This could be the first of many outside acquisitions of Italian companies prior to a legislative clampdown. Earlier this year LVMH went on record as saying it would not overpay for acquisitions, which begs the question why did it swoop so quickly and decisively for Bulgari with a deal valued at $5.2billion, its largest single acquisition in over 10 years? What’s more baffling is that the deal values Bulgari at over 28 times its earnings, a figure that ought to have fuelled a lot more speculation than it did. The Bulgari family have certainly pulled off a colossal deal at a time when the family business’ earnings have slumped by two thirds in the last three years. Added to this, it appears that Bernard Arnault, CEO of LVMH, has made a firm

commitment to the Bulgari family to safeguard the identity and culture of the business. LVMH have made it clear that they can see significant growth potential for this business under their stewardship and we can certainly see greater opportunities for the Bulgari brand, particularly in China and the far east where LVMH already

has a firm stronghold. Most industry speculators are also predicting the return of the luxury market, albeit not to its high point of 2008. The existing shareholders will be keeping a keen eye on the growth of this new division within the group, and only time will tell whether this was a master stroke or an acquisition of vanity.

breaking news on breaking deals

Arkadiy Abramovich, son of Russian tycoon Roman Abramovich, has followed in his father’s footsteps and bought a 26% stake in Crosby Asset Management ,a firm specializing in the energy sector, for for £3m.

France Telecom and Deutsche Telekom are planning a JV to buy hardware in a bid to save costs. The project will bring potential savings of £798m annually after 3 years. The deal is subject to board and antitrust clearance.

General Electric and Google, along with two Japanese partners, are investing $500m in The Shepherds Flat Project, a wind farm in Oregon due to be completed in 2012.

©2010 Harman International Industries, Incorporated. All rights reserved. Harman Kardon and CMMD are trademarks of Harman International Industries, Incorporated, registered in the United States and/or other countries. Designed to Entertain is a trademark of Harman International Industries, Incorporated. iPod is a trademark of Apple Inc., registered in the U.S. and other countries. Features, specifications and appearance are subject to change without notice.

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Audio Jewellery.

5,680 carats of pure sound. Desktop audio systems rarely merit superlatives for either their output or their aesthetics, but the Harman Kardon® GLA-55 speaker system is clearly exceptional. The first true audiophile-quality sound system for computers, iPod players and other multimedia devices, the GLA-55 delivers impeccable sonic performance from exquisitely crafted crystalline enclosures unlike any that have come before. With high-excursion, aluminum-cone woofers in a Slipstream port design, edge-driven CMMD® dome tweeters and 110 watts of onboard amplification, the sound is as distinct and clear as the speakers themselves. Discover technology that entertains beautifully at www.harmankardon.com. For more information or to locate your local Harman Kardon dealer, phone Harman Consumer UK on 01707 278100. 27

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Paper Chase If you’re finally getting around to taking some time out on a beach somewhere exotic, then you may be looking for some literary distraction. Swap your iPad 2 for a few days and take a look at what we’ve been reading recently. If in the year 1411 you had been able to circumnavigate the globe, you would have been most impressed by the dazzling civilizations of the Orient. The Forbidden City was under construction in Ming Beijing; in the Near East the Ottomans were closing in on Constantinople. By contrast, England would have struck you as a miserable backwater ravaged by plague, bad sanitation and incessant war. The other quarrelsome kingdoms of Western Europe – Aragon, Castile, France, Portugal and Scotland – would have seemed little better. As for fifteenth century North America, it was an anarchic wilderness compared with the realms of the Aztecs and Incas. The idea that the West would come to dominate the rest for most of the next half millennium

the detai l s Myra Salzer is one of the top wealth Living Richly advisers in the US Myra Salzer and this book ofLegacy Publications fers guidance to $16.95 those who have been left their wealth, like how to shoulder the burden of riches and avoid the traps associated with being affluent through inheritance. Salzer offers advice, encouraging the reader to overcome the obstacles by learning to take control, preserve wealth and leave a legacy as well as helping to uncover your true potential.

the detai l s

Civilization: The West and the Rest Niall Ferguson Allen Lane, £25.00

would have struck you as wildly fanciful. And yet it happened. What was it about the civilization of Western Europe that allowed it to trump the outwardly superior empires of the Orient? The answer, Niall Ferguson argues, was that the West developed six “killer applications” that the rest

the detai l s Regardless of your opinion of the UK’s Beyond the Crash: ex-Chancellor of Overcoming the First the Exchequer and Crisis of Globalisation latterly PM, this is Gordon Brown compulsive reading. Brown may not have been a strong leader, but his intellectual grasp of the global financial crisis in 2008 was considerable. His take on the near collapse of the banking system is eye opening and he candidly expresses his opinion while explaining some of the decisions which left many of us perplexed.

lacked: competition, science, democracy, medicine, consumerism and the work ethic. The key question today is whether or not the West has lost its monopoly on these six things. If so, Ferguson warns, we may be living through the end of Western ascendancy.

the detai l s Sedlacek pulls apart economics Economics of Good & Evil and questions the Tom Sedlacek notion of economic OUP USA science in this £16.99 published Jun ’11 latest sure-fire winner. His argument that economics is based on the notion of good and evil does hold water, particularly when you take into account his context and sources. The theory that economics is a cultural phenomenon rather than a value-free mathematical inquiry should be enough to whet your appetite.

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As I sat there among the other MDs, with a film of nervous, author’s excerpt toxic sweat rapidly spreading over my forehead, my mind went into overdrive trying to anticipate Chuck’s likely agenda. It soon became clear that he was going to do the old City trick of sacking me just before bonus day. That way his department would benefit from all the commission I generated until the last possible moment without reducing the firm’s bonus pool one iota. No doubt the flabby, vicious wanker was looking forward to the look of shock on my face when he handed me a P45 instead of half a million quid. Of course, any objections I might raise would be totally pointless as I’d clearly broken about three contractual restrictions. If Chuck wanted to play hardball there was every chance I wouldn’t just be kicked out but also be classified as a ‘bad leaver’. That would mean I’d forfeit nearly all of the equity I’d accrued over the years. A third of my previous three bonuses had been paid to me in Geldlust shares that I wasn’t able to touch for three years and those would automatically not vest if it could be proved that I had in any way badmouthed my former employer. That wasn’t going to be too hard to do seeing as there was a year’s worth of columns out there stating what a bunch of worthless scumbags Cityboys were.

the detai l s CityBoy has been something of an Just Business enigma in recent Geraint Anderson years. Having caught Headline the zeitgeist of City Published June ‘11 excesses, penning an anonymous newspaper column and finally exiting the city rat race, he unmasked himself for all to see. His first book, Beer and Loathing in the Square Mile, was a huge bestseller and the timing was perfect. Debate continues as to the fiction/non-fiction status of this novel, but this second book is undoubtedly a work of fiction – we hope. Anderson has a dry and witty style and

once you pick this up you won’t want to put it down. Anyone who has worked in merchant banking will recognise themselves and their colleagues in these pages and you’ll be sniggering behind your Louis Vuitton Evasion sunglasses as our hero, Steve Jones, lurches from one potential disaster to another. This story finds Jones playing with fire, dodging bullets at the office before dodging bullets from South American drug barons. It’s a sickeningly good read and Anderson has seemingly created a modern day Flashman for the City. Buy it, read it and laugh out loud. Definitley one for the beach.

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Business Capital: Rio de Janeiro Although strictly neither the capital nor the economic centre of Brazil, Rio de Janeiro is becoming increasingly interesting for investors looking further afield. Hosting the 2014 FIFA World Cup and the 2016 Olympics could be the icing on the cake. The ascent of Brazil as a global economic force has been rapid and the growth of the economy can certainly, in part, be attributed to the shrewd presidency of Luiz Inacio Lula da Silva. Lula, as he is known, was undoubtedly Brazil’s most popular president and a highly respected politician on the world stage. Dilma Rousseff, the first woman to hold the presidency, succeeded Lula in 2010. Rousseff has an impressive track record and popularity rating of her own. Consistency in government has economic advantages and can create a stable economy if those holding the reins are trusted and respected. In this capacity the country already had the makings of a success story. Brazil has an exciting and vibrant culture and a unique sense of identity. It’s hard to dislike the country that gave us the samba, but Brazil has so much more to offer. Rio de Janeiro has been cleaning up its act and attracting big business from a surprising diversity of sectors. Ranking by GDP places Brazil as the world’s eighth largest economy, ahead of both Russia and India. Consider this in the context of the country 10 years ago, which was floundering and took an IMF rescue package loan of $30.4billion, a record sum at that time. The loan was scheduled for repayment by late 2006, although it was actually repaid more than a year early. Since then the rise has been near meteoric and Rio, in particular, has seen some quite remarkable changes. In 2010 the value of mergers & acquisitions involving Brazilian businesses was $115billion, the largest of which was Cia Vale do Rio Doce’s acquisition of Inco with a tender valued at almost $19billion, making it the second largest mining company in the world.

Oil, mining, electronics, pharmaceutical and aircraft businesses have all enjoyed the boom and the country’s rich natural resources continue to maintain a valuable export market of coffee, soya beans and beef. The technology industry has received significant levels of support from the government, who have been responsible for almost 75% of funding into technology research projects, including Brazil’s ambitious space programme. Local and national government campaigns to reduce crime in Rio have been largely successful and targets are being met in readiness for the next World Cup, hosted there in 2014. A mere two years later and all eyes will again be on Rio as it hosts the 2016 Olympics. Hosting the world’s two largest sporting events in the space of two years is entirely unprecedented, although Rio seems well equipped to face the challenge. These two spectacular events will be costly to host, but it shouldn’t be long before return on investment is realized. In a recent interview with national television the Brazilian Olympic Committee President, Leonardo Gryner, pledged to reduce the ‘clutter’ of sponsorship from the games and, in a bold move, stated that once sponsorship revenues of $1.2 billion are achieved the

“The overall cost of hosting the Olympic Games for Brazil will be US$14.4billion and immediate revenue generation through sponsorship appears to be less of a priority that putting on a spectacular show” committee will close the books and look to reduce the number of sponsorship categories. The overall cost of hosting the Olympic Games for Brazil will be $14.4billion and immediate revenue generation through sponsorship appears to be less of a priority than putting on a spectacular show in the true spirit of the Olympics. This is a great example of Brazil’s long-term thinking and strategic fiscal planning. We’re likely to see a huge increase in tourism to Brazil during the period 2014-2016 and Rio is looking ready to show itself off to the world in all of its colourful glory.

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accomodation

eATING

must sees

1] La Suite

1] Restaurante Olympe

1] Sugar Loaf Mountain

Located in Joatinga, Rio’s own Beverly Hills, this cliffside hotel has stunning views and tasteful modernist design.

French chef Claude Troisgros oversees this quirky art deco restaurant, with a Franco-Brazilian menu. Worth a trip of the beaten path

You could take the cable-car to the top, but why wouldn’t you want to take a private helicopter ride?

2] Relais Solar High up in the Santa Teresa district, the Relais Solar is perfect for the laidback traveller. The bohemian interiors and tropical gardens are a welcome respite from your busy day of sight-seeing. 3] La Maison An exquisite boutique bed & breakfast in upmarket Gavea with sophisticated décor. Well worth a look.

2] Sushi Lebion Japanese food is big in Brazil and the quality benchmark is high. This is among the best around, if you can get a table 3] Zaza Bistro

2] Carioca da Gema Live music and samba are a must, if you have the time, and this venue offers everything you need 3] Posto 9 Beach, Ipanema The only beach to be seen on, without question

For the perfect Brazilian cuisine experience this would be the number one choice. Situated in Ipanema with a stunning terrace and excellent food.

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The Great Debate Our Great Debate asks whether we should have been directing so much aid to Japan while so many Third World countries are crying out for our help? The world stood shocked and stunned as pictures emerged of the sheer devastation of the tsunami in Japan. From a humanitarian perspective it was heart breaking to see the levels of devastation and lives lost. The Japanese are a resilient nation however, as history demonstrates. Shortly after the news broke we saw the rallying of support from nations around the world with financial and medical aid and food supplies. It wasn’t long before a key question was being asked: does the world’s third largest economy need our financial support or should we be channeling this energy and resource to more needy parts of the Third World? This debate was more of a murmur, with few people wanting to be seen to publicly express their opinion, but it’s a valid question. Had we left the Japanese to deal with this without financial aid would there have been greater implications on the global economy? If we were considering hard facts rather than humanitarianism, would we all have suffered financially alongside Japan?

the debate Of course we should be helping our Japanese cousins – they’ve just suffered a horrific tragedy and we are in a position to do them a favour. It’s as simple as that. The logical conclusion of the argument that we should do bugger all just because they’ve got a few quid is that we only help the very poorest people at any one time because they’re the most needy. On this basis we whould only give assistance to the Republic of Congo ($328 per capita GDP) and miss out those ridiculously rich characters in Eritrea who have over twice the per capita GDP! Most of the aid the Japanese received has been in the form of medical assistance and rescue teams, and they definitely needed those a few weeks back. A friend in need is a friend indeed and even the mightiest country needs assistance occasionally when fate throws them a curve ball (remember when Idi Amin sent aid to 1970’s Britain?) Oh yeah, and it doesn’t hurt to show these rich, powerful countries that we’re on their side...

Should we have been digging deep into near empty coffers to help Japan, the world’s third largest economy? Patrick Gruhn Editor, Elevator Magazine

Geraint Anderson CityBoy and author

The question of whether or not to help is a tricky one. Considering the economic power of Japan, the tsunami was not a scenario that needed international intervention to avert further human tragedy. It is also not right to weigh one need against another because all claims are equal in a state of distress. Personally, I’ve been frustrated with charity donations because the money seems to go through so many stations, like a hand full of water. What you intend to give never gets to where you want it to go, so if you want to help Japan or Africa or any other place it’s a matter of what is closest to your heart. My only advice is that you try to get as close as possible to those who need our help, because the closer you get, the bigger the impact will be on them – and on you.

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Open Monday to Saturday 0800 hours until 1900. Sundays 1100 until 1700.

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6 3 8 3 0 4 2 4 4 4 6 4 chatvibes

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The Elevator Deals Section

Social media is unavoidable for most of us and ChatVibes are poised to take advantage of our information obsession

Ideal power converters

The development of clean energy is clearly an important issue and with Ideal Power Converters there’s scope for ethical investment

Identec Group

This industrial holdings business was amogst the first companies to be featured in Elevator in 2006, we’ve been keeping an eye on them ever since

firstpex

A few have attempted to launch an Equity Exchange website, but have failed to make them usable. FirstPEX seems set to succeed where others have failed

Art stock exchange

Investing in fine art is a tricky business. High value artworks can be expensive to insure and maintain, but if you’re simply looking to invest in art then we may have the answer

Midomo

Red Button Design are one of the most exciting social enterprises we’ve seen in a long time. Their water purifier could be a real life-saver for those with no access to clean water supplies

deals

Chatvibes

Talking Shop These days social media is entirely unavoidable for the majority of us, but is there money to be made from the peripherals?

As we see Facebook rapidly reach near saturation of the global market, it’s clear the next move for social media platforms is lateral growth, offering yet more enhancements to their products, either themselves or through thirdparty providers. Facebook’s expansion has spurned a subsidiary market filled with developers releasing their software in the form of apps and browser add-ons to further enhance the Facebook experience. And ChatVibes seems poised to take advantage of this bolt-on market. ChatVibes Ltd was founded in 2010 with headquarters in Tel Aviv, Israel. The management team is impressive on paper, with a strong track record of proven success in online business. The company develops and markets browser-based add-ons and extensions for social media websites, the idea being to generate significant traffic and then generate revenue from that traffic via advertising partnerships with search engines. Sounds simple enough. The target market is significantly large, in that over 65% of the global population are using social media sites. Facebook alone claims over 500million users, 250billion page views each month, over 2bn chat messages each day and 150m

search queries daily. Overall it’s a huge target market, to the point where the term ‘target’ becomes redundant. The product here is a browser add-on which can be downloaded and used free of charge by anyone using their Facebook account. The software allows users to voice and video chat via Facebook, rather than the standard Facebook text chat feature. The technology behind the product is based on Peer-to-Peer, the fastest growing internet communication architecture. Once the user downloads the extension the proprietary add-on is added to their browser. This automatically changes the user’s default search provider, landing page for new browser tab and adds a new search field to the Facebook page. The company will then generate revenue each time a user clicks on search ads via the add-on. There is also potential to generate revenue from ads placed within the chat window. Projected revenues provided by the company make brief, yet interesting reading: - year 1: expected installed base 1,550,00 users, expected annual revenue per user $0.86. Expected revenue $1,340,000. Revenues for years 2 and 3 have been projected at $4m and US$9m respectively.

“The target market is significantly large, in that over 65% of the global population are using social media sites. Facebook alone claims over 500million users, 250billion page views each month, over 2billion chat messages each day and 150million search queries daily.”

Inevitably there will be stiff competition in this market and careful research brings up similar businesses working within this lucrative sector. Rounds, Camfrog and ooVoo all seem to have comparable products on the surface and have already made significant inroads to the market. These, however, are separate applications, as opposed to browser extensions. This makes ChatVibes closer

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the industry

five years ago

present day

five years on

The social media market 5 years ago was still very much in its infancy. Facebook had yet to dominate and the average user was likely to be 16-24.

The market has grown beyond even the most optimistic of expectations. Over two thirds of the world’s population now use social networks on a regular basis and the dominant market leader, Facebook, is aggressively developing its platform to retain market share.

We’re already seeing a huge shift towards mobile usage with social networks with check-ins and other GPS related features. Social networks could well become a data store of our lives, acting more and more as social tools and a record of our movements. Whatever happens it’s likely to be unrecognizable by today’s standards.

deals

in concept to Skype as more of a standalone product. The advantages and disadvantages of this approach are debatable, although ChatVibes does seem to offer a more seamless experience for the user who can simply click and go, rather than logging in or opening their application. Whether this is a real concern to the potential user or not remains to be seen. The risk potential does need careful consideration. There are a number of

areas that will need to be researched. The reliance on search and online advertising for all revenues raises some concerns as the online advertising market is deflating and showing little sign of lifting any time soon. Facebook could very well introduce their own video chat feature. They’ve recently started to make moves towards the email market with a view to directing members’ email through Facebook and video chat could well become part of their future plans here, thus damaging

the ChatVibes business model. The board of directors are valuing their business at $2m and are now seeking investment of $550,000 in order to bolster marketing activity as well as funding continued development. The future in this busy marketplace will certainly be intersting. For further information and up-to -date news visit the ChatVibes website at chatvibes.com

a word from the experts

first time investor

angel investor

high risk investor

Regardless of the investment amount, this is not for the faint hearted. There are risks and the ever-present possibility that Facebook or Google could create their own versions, thus damaging the business model.

This would be a tough call for even the most seasoned investor. Could be well worth taking a view, as it may be one you regret not taking up. On the other hand, this could easily be another Betamax.

This is potentially a juicy deal with a fast exit within 12 months. The key to the success of this business is in the speed of growth and good marketing is vital. With the right team and backing it could hit projected targets, but be wary beyond Year 1.

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Ideal Power Converters

A Cleaner Future The development of clean energy is clearly an important environmental issue and there’s scope for ethical investment with a realistic return.

Texas, once synonymous with the excesses of the oil industry, is now leading the way in the advancement of cleaner energy supplies. These are exciting times in the Lone Star State and we’re hearing about some world beating technology projects emerging from this part of the world. Ideal Power Converters is a business we’ve come across more than once and they look like they have a few aces up their sleeve in the race for clean energy. Electronic power converters provide the infrastructure enabling the clean energy revolution including wind and solar renewable energy production, smart power grids, improved building efficiency, and electric vehicles. Ideal Power Converters (IPC) has patented, and is further developing, a power converter topology with dramatic improvements over conventional converter systems for photovoltaic, wind, battery, motor control and other applications. “IPC’s technology can disrupt several established billion dollar electronic power converter industries and make the United States the worldwide leader for this critical clean‐energy industry,” said Dr. Hamid Toliyat, Director of the Electric Machines & Power Electronics Laboratory at Texas A&M University. The company recently entered into a major licensing agreement with Lockheed

Martin and received a contract to develop a next generation power converter system for forward operations of the US Army. This agreement validates and reinforces the strength of IPC’s technology and patents. In addition to its initial two US patents, IPC has several additional patents pending in both the US and internationally for its revolutionary power converter technology. IPC’s initial product is a commercial‐scale PV inverter system that weighs less than a tenth of conventional best‐in‐class competitors. It uses similar commodity materials and components, but controls the power flow in an entirely unique and patented method. IPC’s lower weight dramatically reduces cost of materials, manufacturing, shipping, and installation of large‐scale PV inverter systems. Moreover, the efficiency and reliability of the inverter system is improved as well. It has successfully installed a pilot system at the Austin Convention Center that verifies its claims for superior weight, size, cost and efficiency. The company is completing development, including industry certification, and will begin volume production in 2011. Due to lower cost of materials IPC will manufacture its inverter products in Texas at less than half of the cost of competing systems, which are primarily manufactured and shipped from China.

“Due to the considerably lower price of materials IPC will manufacture its inverter products in Texas, at less than half of the cost of competing systems, which are primarily manufactured and shipped from China.” IPC is a member of the Austin Technology Incubator and has received over $1million seed funding from the State of Texas Emerging Technology Fund and Battery Ventures, as well as a small seed-funding round from a top-tier venture capital firm. It also continues to seek government grants and collaborative opportunities at local, state and national levels. The company will manufacture its products in high volume in the US for distribution to both domestic and international markets, while generating much needed manufacturing jobs and exports in the clean energy sector. At this stage there is a requirement to raise addi-

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“Going green” was beginning to interest more than just hippies. The sector emerged based on a new and global environmental awareness movement that caught the eye of investors. A new star in was born – surprisingly enough we didn’t see an investment bubble.

Clean energy and everything related to it is recognized as a sector that points to the future, a “sunrise industry” and a “feel good investment”. Green investments have become popular through all classes of investors and continues to grow at a strong pace.

Assuming the levels of investment in this sector are maintained or even increased, clean energy will have established itself as one of the economic pillars and will slowly make its move on fossil fuels. As investments increase, R&D will also flourishes and make clean energy the standard in all fields of consumption.

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tional outside funding in order to further develop technology during 2011/2012. With two US patents granted and many additional US and foreign patents pending, IPC maintains secure intellectual propriety rights to its technology worldwide, which

will be a distinct advantage in securing safe level investment. A recent IDC study indicates that US market demand for PV inverters is projected to grow by more than 60% annually for at least the next 3‐5 years, surpassing one

billion dollars. Many analysts forecast that the US will become the world’s largest market for PV products within 5 years. For further information and up to date news visit their website online at idealpowerconverters.com

a word from the experts

first time investor

angel investor

high risk investor

If you’ve been been drawn to clean energy as an investment for a while, why not make money and do something great for the planet? Its important, however, to look at the business model and not the buzz of the sector.

Its a tricky field to get into, simply because there are lots of companies out there using the good name of clean energy and buzz worlds like “go green” and “sustainability” to attract investors.

If you like this sector, the best idea is to seek out a number of companies, do your due diligence and then invest a certain amount in all of them. Inevitably some companies will fail, others will succeed to get a piece of the pie so, if your spread is good you’re likely to come out ahead.

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Firstpex

Europe’s First Private Equity Auction Platform A few companies have already tried to launch “equity exchange” websites but have failed to make them usable. FirstPEX seems set to succeed where others failed.

Facebook was not the first social network created on the internet. Its success was in the way it came to market paired with the fact that it was the first social networking site that embraced and made use of webtechnologies that had just been created. It was the dawn of the new internet, people were warming to the idea of chatting and sharing online and Facebook succeeded because it made all of that easier – not more difficult. FirstPEX is not the first website that allows its users to buy and sell shares of nonlisted companies online, but it is the first site that does it well. Advanced technology, secure systems, and smart user-journeys allow users to quickly and efficiently chat to investors and business owners, allowing the secure and confident trade and sales of shares online. For business owners, the process is surprisingly simple. After registering, they answer a series of questions on their business, submit files, figures and information. These are then submitted to the FirstPEX administration team, a group of hot-shot Swiss-based private equity experts on hand to help vet and approve the application to make sure they’re legitimate and honest. Once approved, the listing is live. For investors, a hi-tech live search allows

you to quickly drill through thousands of projects listed on the site, by the amount of funding required, the industry, the use for funding and other criteria . When they find a project they like the look of they’re presented with facts, figures, spreadsheets and PDFs, they’re also given the opportunity to start a conversation with the business owner. Once ready, the investor has the opportunity to place a bid for the company or the percentage of shares thereof. Two simple sliders control the bid parameters, the amount offered and the equity requested. For a quick deal, investors can slam both sliders right, full equity for full money, but for the more shrewd negotiator, the sliders offer a unique and intuitive way to help structure a deal. Bids are sent to the business owner where they are able to accept or reject. If the bid wasn’t for the full amount, the listing stays live, allowing FirstPEX investors to club together to pool investments. So what keeps the business owner’s information safe? Again, it’s the FirstPEX team who vet every single application for an investor account. “FirstPEX is not a free-forall, it’s a carefully constructed community of serious business people,” says Thierry Petersen, FirstPEX’s head of operation at the company’s Montreux office.

FirstPEX is not the first site that allows its users to buy and sell shares of non-listed companies online, but it is the first that does it well.

Investor’s accounts cost money – not much, but enough to deter people from signing up simply to see what’s on offer. Listing companies also costs money. The fees are nominal, not enough to deter anyone from listing a serious company, but enough to assure Investors and business owners that the people browsing the site are serious. FirstPEX, like all good auction sites, makes its money when a deal is completed. Only when an investor and business owner have the satisfaction of completing a deal successfully are they subject to the level

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The private equity industry was still very closed-off to small investors or simply retail customers, then we saw an emergence of funds that allowed all types of investors to get a piece of the action with great returns. What followed was a few record years in the industry.

A few marketplaces have emerged, mostly in the USA and these companies have rapidly attracted attention, especially by trading companies prior to their IPO. The trading of non-listed equities before they explode onto the public markets has become a real option.

Equities changing hands this way will have drawn a large crowd and it will likely be a recognized source of investment, and a respected place for shares to be traded. Its likely that FirstPEX will establish themselves as a good solution for companies and individuals to make illiquid assets liquid.

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of fees that someone might associate with a site of this stature. Around 0.75% of the total transaction is payable to FirstPEX, with the fees optionally being split between the investor and business owner’s FirstPEX accounts. The FirstPEX project has been in the making for nearly two years now and was spearheaded by some top names in the private equity game. Whilst a number of existing sites cater to the people listing companies and startup concepts, FirstPEX has ensured the site is tailored and suited to investors. It’s all well and good if business owners are able to list information on their company,

but if there are no active investors using the site, then it’s no more useful than shouting in the street. FirstPEX has worked incredibly hard with Geneva-based law firm, Bär & Karrer to ensure that the terms and conditions, rules and operations of the site comply with the notoriously tough Swiss FINMA, which has approved the platform to go live. During our research we saw a number of websites live and operational, offering similar services, but without having any regulation in place, it’s a clear sign of a site that has never actually completed any deals successfully. Hearing the processes, expenses and legal documentation that

FirstPEX had to endure to launch is staggering, so it’s easy to see why many sites like this would operate outside of regulation. But it’s also easy to see a wave of crackdowns in the near future, as unregulated sites face orders to shut down. So when choosing a site to find investments, or to list a company you’re interested in selling in part, or whole, search carefully. Check the regulations are in place, and check that there’s a qualified and knowledgeable team behind the site. FirstPEX.ch is a pretty sensible place to start. For further information or to sign up visit the website at firstpex.com

a word from the experts

first time investor

angel investor

high risk investor

The business model of FirstPEX looks excellent andwe see the added value for buyers and sellers.We’d probably list some of our shares on the site when looking to sell them. Its a concept that makes sense and looks like it can succeed.

It’s interesting but for angels it’s actually too late. It may sound paradox as the company is just launching but we wish the creators of FirstPEX had pitched this to us – we would have gladly funded the development of the platform.

This is what Iwewould call a “bullseye”. It is right on time to capitalize on a new type of trading system. Since there appears to be no European platform, this company is odds-on if it can attract enough attention and provide the right balance of investors and offerings alike.

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Identec Group

Revisiting RFID Identec Group is an industrial holding group and amongst the first we ever featured in Elevator, back in 2006. We’ve kept an eye on them ever since.

Identec has had substantial success over the past years, reaching key objectives and milestones and among the first to actively invest in the RFID technology that’s been making its way into our daily lives, especially in the sectors of communication, identification and tracking. It is more than likely that RFID (Radio Frequency Identification) will continue to complement the bar code as it is an evolution of that technology and offers many advantages. The RFID technology requires no more energy than for example a bar code scanner; every tag, which actually uses no energy at all, receives its own identification number and reflects the information back to the detection device (reader) with its unique signature by radio wave. A result of this technology could for example be a fully automated supermarket where items in your cart are automatically detected and paid for with your credit card. The RFID technology exists in a fixed as well as mobile format and its applications are spreading virally in many sectors. RFID tags are already found in hospitals, passports, casino chips, toll roads, public transport, animal identification, all types of inventory systems, libraries, museums, as well as race timing. The application for

this technology is, as you can see above, extremely vast and holds huge potential for investors. Identec Group is one of the prime developers and marketers of this technology. It has a fully integrated business model in order to increase sustained profitability, which it has done since inception in 2005. The RFID market has grown by roughly 25% each year for the last five years and so has Identec. The client base of the company is impressive to say the least, ranging from hotel chains, to government contracts to top tier car manufacturers all over the world. Over the past three years, the corporate spending in the RFID sector has grown by 536% as published by VDC Research in 2010. Another research report by Deutsche Bank shows that whilst the RFID market was worth less than two billion Euros in 2006, it will reach 16 billion in 2016, which is remarkable and very promising for those who invest in this sector. “After five years of investing, the company has built a portfolio of RFID companies, uniquely covering the entire RFID value chain.” Says Antonio Frega, a financial advisor in Zürich who has been actively recommending Identec to his

“Over the past three years, the corporate spending in the RFID sector has grown by 536% as published by VDC Research in 2010. Another research report by Deutsche Bank shows that whilst the RFID market was worth less than two billion Euros in 2006, it will reach 16 billion in 2016.”

clients for years. He goes on to explain that the company’s investment process has allowed for solid growth and healthy revenues over the years and he believes that Identec will continue its success exponentially over the coming decade. ID Solutions, one of the companies owned by Identec Group has already won several awards such as the Swiss Logistics Award or the Product Line Leadership Award from

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Although the idea of RFID dates back to 1945 and the first patent dates back to 1983, the RFID sector only dawned in the beginning of the 21st century. In 2006 it was in the early stages of industrial deployment and many uses were discovered for this technology. At this early stage, the industry did a turnover of around two billion Euros in 2006.

Although the industry is growing at a strong pace of about 25% per year, RFID has already established itself as a reliable technology in many sectors all over the world. RFID holds substantial promise for those who can understand its application and added value to the fields where it is applied.

RFID will most likely be one of the most important standards for logistics and inventory management and likely even more applications in our daily lives if the technology doesn’t meet too much resistance from privacy activists. It is likely that the industry turnover will reach 16 billion Euros.

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Frost & Sullivan. One of the big intrinsic assets of the company is its leadership. The two seasoned entrepreneurs Martin Zumtobel who sold his chain of supermarkets in 1993 to the Swiss conglomerate Migros and is now fully invested in the RFID technology, is the chairman of Identec Group and at his side, Dietmar Amann a veteran VC investor and private equity specialist with

more than 20 years of senior experience is the CEO of the Group. Both are holders of several master degrees. It appears that the RFID technology is one of the stars of the 21st century and has created quite a buzz amongst wellinformed investors. On the flipside, there has been some controversy about the RFID technology from activists who advocate that this technology is a serious risk to for

our privacy but then again, which great invention hasn’t encountered objections? Having followed the company and particularly the evolution of the technology, we are rather positive about this sector and Identec Group is the market leader. For more information visit the website identecgroup.com or simply email Mr. Antonio Frega at a.frega@first-city.ch

a word from the experts

first time investor

angel investor

high risk investor

This sector seems to be quite appealing, although it is not very known yet I think I’m quite interested to follow its evolution. I’d most likely wait a little longer and then subscribe to an IPO when it becomes available because I’m concerned about the liquidity at this point.

Due to the strong interest from the investment community, the RFID sector hasn’t been in much need for angel investing. There is substantial capital available to this sector and whilst I’m not personally invested in this field I think it will grow strongly for the rest of this decade.

We have known about RFID for years and it has shown our clients and us some good returns. We will stay committed to this sector for a few more years until its growth levels out. Even if it is a high risk investment by nature, the risks can be controlled and minimized which is ideal for our strategy.

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Art & finance services

Hand on Art

Investing in fine art is a tricky business. High value artworks can be expensive to insure and maintain, but if you’re simply looking to invest in art, then we may have the answer

In comparison to other economic markets, the art market is currently structured in a radically different way. Its peculiarity makes it difficult for investors to easily understand the market and, therefore, approach it with confidence. Passionate collectors, who have taken the time to appreciate the way the art market works, have seen sizeable returns. We often see newspaper reports detailing works of art passing through the doors of Sotheby’s and Christie’s alleviating buyers of extraordinary amounts. It’s not unheard of for art collectors to gain or lose up to 30% of their original purchase price over 5 years. If you’re investing US$10million on a Miro and then see your hard earned dollars drift away in insurance and maintenance costs it would be something of a kick in the teeth when it came to liquidising the asset to find that the auctioneers were bereft of the ‘right kind of buyers’ on your day and another US$2million slips away from the original estimate. It’s not a game for the faint hearted and if it’s purely the investment angle you’re considering, as opposed to the pleasure and enjoyment gained in ownership, then you may want to spread your eggs across a series of more comfortable baskets. Over the past ten years, various banks

and institutions have attempted to make their mark in this area by setting up funds, often having disappointing results. The main obstacles are exceedingly high prices for major works of art, limited pieces available, high handling fees and a generally poor distribution of artworks. Who would sensibly consider tying up a large amount of capital in a single artwork asset? Nonetheless, and interestingly for investors, art is an investment with a secure value in the long-term, whilst being the subject of much speculation and volatility in the short-term. There is thus an interesting security/profit ratio involved in this form of investment. Art & Finance Services offers a simple, clear and familiar model through which other economic players can invest in art. Through the ‘joint ownership’ of the works, art becomes a liquid and accessible asset for everyone. Through the volume of information made available, Art & Finance Services is able to present the art market in an exhaustive, clear and familiar manner. The strict selection of artworks introduced into its marketplace ensures a sound investment, thus reassuring investors of the limited amount of risks taken. The joint ownership of artworks renders the market far more liquid, allowing

“The strict selection of artworks introduced into its marketplace ensures a sound investment, thus reassuring investors of the limited amount of risks taken”

a quick, easy and inexpensive exit. In the same way, the market is opened up and made accessible for a considerably larger public. Art & Finance Services covers all logistical, management and promotional costs, further lowering the financial burden for investors. Finally, the attractive and, more importantly, transparent commissions leave way for flexible investments. Clients are free to pass their purchase and selling orders at any time. A daily fixing at 6pm matches and executes the various orders.

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The art market was, along with everything else, going sky high and every other week there was a new record auction result. The sector has always been tricky because it is very hard to tell which artist will prevail in his quest for fame.

Technology has helped this market a fair bit and has allowed even amateurs to become more knowledgable as more resources are available to study the prices and historic auction results which allows buyers to make a more educated decision on the value and the price evolution.

The rules of the game haven’t changed in a long time and there’s not likely going to be much of a difference in five years from now. Investors and amateurs are going to buy art for their viewing pleasure and as an investment. However, liquidity may change which will make it more appealing for a wider audience.

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Art & Finance Services commits itself to offering the transparency necessary for an investor: transparency regarding prices and volumes, as well as the situation of the artwork, artist and market. When introducing an artwork they systematically assess it in order to provide proof of authenticity. An artwork can only be removed from the marketplace once a single shareholder

possesses all the shares. As you would expect the company provides a safe trading environment, eliminating all risk of non-payment. The transfer of property is only carried out once the transaction has been validated. Art & Finance Services has conceived a specific model destined to maximise the levels of trading for investors. Its model revolves around a centralised

and simplified order system, very low commissions, the elimination of all management fees and the division of property. In order to uphold control and to easily understand the marketplace the platform does not permit any form of negotiation outside of the central system. Take a look for yourself at afmarkets.net and you may just catch the art bug.

a word from the experts

first time investor

angel investor

high risk investor

I think that art requires a certain passion and interest from the side of the investor in order to succeed and regardless if it is liquid or not, my research in this sector clearly indicates that it takes a very long time to see proper returns.

The art market certainly could use some more transparency and a little less randomness. If Art & Services can provide that, there’s a good chance it can capture some of those clients who are new to the industry and would like to invest.

We have a part of our portfolio already in art, it is appealing because we can actually help to push the artists we support and give them the exposure they need to become recognized, build a brand around themselves and create the demand it needs reach the desired levels.

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The midomo

A Safe Water Solution A successful visit to The Dragons Den and a product which can save the lives of thousands makes Midomo an exciting proposition, one not to be ignored.

It’s an appalling fact of modern life that over 3.5 million people each year die from diseases directly related to poor quality drinking water and sanitation. To put that into perspective, that’s half the total population of Switzerland. The human brain is unable to deal with numbers of this scale so putting some kind of perspective around this is a sobering thought. It’s even more disturbing to know that so many of these deaths are infants and there are solutions to the problem out there. Red Button Design was founded in 2007 as a social enterprise, with the purpose of tackling issues like this and finding viable and sustainable solutions. In the first instance the founders, Amanda Jones and James Brown elected to address the issue of safe drinking water, which is still a luxury over 1 billion people don’t have. In tackling the problem they could see a need for a product that offered not only filtration, but also transport and storage. In Africa it’s common for women to walk over 6km to the nearest water source and then carry the 20kg of water back. As you can imagine, there are a number of challenges to be considered here. Their solution to this problem is Midomo. The name means ‘lips’ in Kiswahili

and it has truly life saving potential. Midomo uses an internal system of filters that clean and purify the water during the transportation process. The user can wheel the Midomo to the nearest available lake or river, fill the 50litre water tank and then a minimum journey of 1200metres is all it takes to filter the water to a level that’s safe to drink. The water can then be left stored in the Midomo in order to prevent cross contamination and then used safely. It’s an extraordinarily effective solution and one that could very quickly change the lives of millions of people. The cost of the product is $160, with a replacement filter cost of $25. In real terms $1 gives a community over 300litres of safe drinking water, which is a small price for many of us to pay in order to help remove the fear of water born disease form these peoples’ lives. As part of a wider initiative, Red Button Design has teamed up with jewellery designer Alex Monroe to offer The Midomo Bracelet. The idea is simple enough, you purchase the beautiful silver bracelet for £275 and a Midomo is donated to an African community on your behalf. The bracelet is imprinted with a serial number that allows you to track the progress and delivery of your

Amanda Jones and James Brown elected to address the issue of safe drinking water, which is still a luxury over 1 billion people don’t have. In tackling the problem they could see a need for a product that offered not only filtration, but also transport and storage.

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The industry, as such, was negligable and there were few products, if any, comparable to Midomo.

Safe drinking water is a priority and international aid organisations are committed alleviating this problem by 2015 as part of The Millenium Project. This means that we are seeing a rapid growth in demand for products which are able to purify water to recognised safe drinking standards.

Current estimates show that the market for these products will grow quickly as aid agencies are committed to halving the number of people globally with no access to safe drinking water.

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donated Midomo online. Delightfully simple, easy on the eye and beautifully handcrafted. It’s this kind of inspired thinking that makes the difference in getting a project and a product noticed. Based on current demand Red Button Design are expecting to triple their output over the next 12 months and are looking to deliver 3,000-5,000 units in that time, enough to service 15,00025,000 people. They’re also working alongside international aid agencies

that are committed to reducing the number of people without safe access to drinking water by 50% before the end of 2015. That represents some 500million people and will require a huge international effort and undoubtedly there will be a significant need for portable products that can quickly and effectively make water safe for communities. It seems abundantly evident that the market exists and if the product is ready to go and already in production then Red

Button’s efforts and lateral thinking shouldn’t go to waste. In 2010 the company closed its second round of funding in order to relocate and further develop the business. At this stage they are open to discussion of financial support from interested parties and we’d urge any interested readers to contact Amanda directly by visiting www.midomo. co.uk, or alternatively buy The Midomo Bracelet at www.midomobracelet.org

a word from the experts

first time investor

angel investor

high risk investor

This is clearly a great product and is shown to have a sizeable market. What needs to be considered here is whether rival products will enter the market from cheaper manufacturing sources.

As investments go this could be not only a useful addition to a portfolio, but also has that feel good factor. You would be surprised how rewarding projects like this can be... you are supposed to be an “angel” after all.

The potential market is huge and resales of filter products makes the business very interesting. The product has a real head start in the market and could grow rapidly in the next five years, particularly with the very capable management team involved.

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48 THE--ELEVATOR.COM

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wealth management

In association with Jasso Financial Services Ltd. www.jasso.ch - office@jasso.ch

The Elevator Wealth Management

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A Room with a long term view

in association with Jasso. 50

Play it safe but donâ&#x20AC;&#x2122;t stop playing in the property market, says Matt Crofton

Sound Bites

We take a look at some sage advice on business and wealth

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planning

Myra Salzer looks at planning your wealth legacy to ensure it lasts for generations to come

Banking on recovery

David Thurlow discusses the difficulties of funding for small businesses in the UK

wealth management

In association with Jasso Financial Services Ltd www.jasso.ch - office@jasso.ch

PROPERTY

A Room with a Long Term View Everybody hurt in 2008-9, and prime London residential property was no exception; prices dropped by around fifteen per cent and there were a few highprofile casualties who lost their shirts. But the drop was brief and prices are now very much on track once again. One Hyde Park looks set to easily break the £1 billionmark in the next few weeks; off-plan sales at the Vauxhall Tower appear strong; we’ve seen as many as a dozen asking price offers on £1-3m Wandsworth family homes within days of the properties hitting the market. The majority of property investments escaped the crunch relatively unscathed, largely due to the relative illiquidity of the asset rather than to any canniness on the part of the investor or fund manager. Whilst panic set in on the stock markets, and share prices tumbled as brokers offloaded en masse, it’s not so easy to make a quick exit from bricks and mortar so – whilst paper fortunes may have tumbled – the real value of assets remained as long as owners could afford to not sell-up. And the short-lived price drop generated a flurry of activity in London from domestic and international investors. There were hordes of opportunists looking to snap up bargains from the more beleaguered investors, developers and home-owners, forced to flog their assets at knock-down prices; these opportunists managed to accelerate the prime central recovery even faster than would have happened organically. Residential property investment funds popped up overnight but, by the time most had gotten around to marketing themselves and filling subscriptions, prices were well on their way up again and the funds missed out. The Candy brothers attempt at a recovery fund, marketed for only two months before missing the boat and disappearing, was probably the most high profile. Chasing short-term peaks and profits in the property market will always play second fiddle to the relative security that a medium-to-long-term investment in bricks and mortar offers, especially in established markets such as prime central

Play it safe but don’t stop playing in the property market, says Matt Crofton

London. Of course there are bargains and undervalued assets strewn around the globe – from Beijing fringes to Ukrainian farmland – but there are (nearly) always inherent risks that threaten the medium and long-term prospects of such investments. It could be political instability, questionable legal status or environmental factors but, when “property hotspots” seem to appear overnight, investing is more akin to plonking the lot on red than hedging a portfolio. Pure chance always plays a part too: a very esteemed, very astute firm of solicitors picked New Zealand as the best place to invest in property last year. It’s not looking so good for investors who followed that advice. Many have, and continue to, make a mint out of the Shanghai boom: space is at a premium, the economy has a long way still to grow, and demand is being driven by both domestic and international money. But new developments are popping up at an unprecedented rate, and there is a very real concern amongst some seasoned folk that property is bubbling rather than genuinely rising in value. Bubbles are, as with any asset class, a recurring problem in property markets. Ireland’s ghost towns – the result of government incentives plus monied over-excitement – are a rather depressing monument to what spiking prices and ensuing over-supply can do to a nation, an economy and a bank balance. With global volatility the principle trend of the last few years, overnight international hotspots have seemed to crop up in the most unlikely places (the point, I suppose). In some cases, these are genuine opportunities (see Shanghai and Ukraine) that will yield excellent returns but, in others, it seems that investors are using the volatility of previously “safe” markets as an excuse to take a punt on anything: Congolese property is, relatively, less risky now that Barcelona’s not such a dead cert’. It’s still not the wisest move, though. London has long been the grande dame for international property investment, with prime properties easily being the best performers: luxury London properties are

“Many have, and continue to, make a mint out of the Shanghai boom: space is at a premium, the economy has a long way still to grow, and demand is being driven by both domestic and international money.” up 17 per cent from last year according to Bloomberg. This March’s PrimeLocation PrimeIndex figures illustrate the general trend: the UK national trend for prime properties’ prices saw a 0.7 per cent drop on February, whilst London prime saw a 4.6 per cent monthly rise. Even in the troubles of 2008, prices, according to PrimeIndex, remained static at the top end of the London market. And the reasons for London’s enduring and continued popularity are legion. Prices are driven by both domestic and international demand, which lends stability in the face of any localised political or economic turbulence. International demand, which has seen even more of a spurt due to the weak pound, has traditionally gone through phases: Russian, then Middle Eastern, now Asian – but buyers and investors in London are cosmopolitan and truly international, lending yet more stability to the market. Quite apart from London being a world finance and business hub, foreign demand is being driven by status and British education, particularly amongst the current influx of Asian buyers and investors. Knight Frank’s recently published Wealth Report states that “In 2010, almost 63 per cent of all new-build flats in central London were sold to international buyers. After investment, the single biggest driver of demand for these buyers was the desire

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from parents to provide accommodation for expat students during their studies.” Whilst the expat student market may not be the main driver of the prime and superprime market, it is delivering an excellent foundation for a solid wider market. And similar trends are seen at the top end: St George, developer of The Tower in Vauxhall on the south bank of the Thames, expects the majority of flats in the new development to be snapped-up by Asian and Middle-Eastern buyers. They have even given the development’s interior décor an Asian tang, importing tonnes of Chinese granite. Vauxhall may not be the first location that springs to mind for super-prime property, but St George are banking on views of Houses of Parliament, London Eye and City making up for the south-ofthe-river location and SW8 postcode. The £6000 per square foot price tag is ambitious, but not ridiculous. The UK’s tax system also plays into the hands of international buyers, with no tax payable on capital gains. Philip Munro at Withers says that “UK real estate can be a very attractive investment market from a tax perspective. For non-residents investors not trading in properties, the UK is favourable because capital gains will not be taxed. In not taxing real estate gains realised by non-residents, the UK is relatively unusual. Rental income will be subject to income tax in the hands of a non-resident

but it is possible to minimise tax on rental income through leveraging purchases and be deducting costs associated with the property from this tax.” London’s ongoing investment in infrastructure – Heathrow Terminal Five, St Pancras, Crossrail – is ensuring that the city remains modern, relevant and enjoyable, whilst supply of decent prime property is limited, and will be for the foreseeable future. The Wealth Report, commenting on New York and London’s positions at the top of the economic, political and influence lists, says that “The most reassuring element to note for New Yorkers and Londoners is that the two top spots don’t look set to change over the next 10 years.” Stephen Yorke at D&G Investment management has a similarly buoyant view of London’s future prospects: “In the prime London residential market, the trend of falling stock has been in place for over 10 years and there are no signs of that changing.” He expects prices to rise by 10 per cent during 2011. The Olympics are being talked-up as a key driver of the current property market, but the effect on prime central London will be felt more in the rental market than on sale prices. But it’s not enough to rely on the market going up, and it’s here that being a hands-on investor rally reaps its benefits. Simply buying new-builds or properties that match a checklist will probably keep

pace with market growth and yield an ok return but, with a bit of care attention and knowledge, you can build a portfolio that will out-perform the market and provide additional security against downturns. Specialist funds, such as London Central Portfolio, know their onions and stick to what they do best: high quality residential property in central London. They consistently deliver returns in excess of market rates, and do so by choosing only the best properties that offer both sustainable high capital growth and secure, profitable rental incomes. It’s finding these properties that is the very simple key to a successful property investment strategy. There is, obviously, a lot of demand for the two-bed flats and super-prime houses in high-end proven locations such as Chelsea, Kensington and Belgravia; these are the safest bets that deliver the best results, consistently out-performing the market at large. The best of these properties rarely reach the open market: funds, with dedicated buying teams, and specialist property finders – like Crofton & Associates – use their networks to reach them first, snapping up the picks of the bunch for private clients and investors. Helping private buyers, corporate clients and investors find the perfect property – to buy or rent – since 1984.

our correspondEnt matt crofton director Crofton & associates Crofton & Associates is one of the most established forms of property finders in the UK. www.croftonandassociates.com matt@croftonandassociates.com +44(0) 20 7493 5871

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quotes

Sound Bites

Sometimes we are all guilty of not seeing the woods for the trees, it’s inevitable that at some point we all need to take a step back and consider the position we’re in and how we came to arrive there. History can offer us some sound advice, so read on and smile as you may recognise your own strengths and weaknesses. Times have changed very little when it comes to lending and borrowing. “I don’t trust a bank that would lend money to such a poor risk” Robert Benchley, (1889-1945) US essayist and actor on being told that his loan had been granted. “Where large sums of money are concerned, it is advisable to trust nobody” Agatha Christie (1890-1976) English writer and playwright, taken from Endless Night (1967) “Creditors have better memories than debtors” Benjamin Franklin (1706-1790) United States statesman, taken from Poor Richard’s Almanac (1758) And our opinion of economists seems to have remained fairly constant. “Economics is extremely useful as a form of employment for economists” Anon

The pursuit of wealth has existed in one form or another since man learned to stand on two legs. The game hasn’t changed much in that time, as history shows.

“There are three kinds of economist. Those who can count and those who can’t” Eddie George (1938-2009), Governor of The Bank of England, taken from The Observer Review (1996) “But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again” John Maynard Keynes (1883-1946) English economist, taken from A Tract on Monetary Reform (1923) When considering the fundamental rules of creating a profitable business we’d be wise to remember those who came before us. “Generous people make bad shopkeepers” Honore de Balzac (1799-1850) French writer, taken from Illusions Perdues (1843) “It takes one hen to lay an egg, but seven men to sell it” C.J. Dennis (1876-1938) Australian Poet “When you are skinning your customers, you should leave some skin on to heal so that you can skin them again” Nikita Krushchev (1894-1971) Russian statesman, remark to British businessmen In terms of good advice, I leave you with a few of my favourites.

“The difference between playing the stock market and the horses is that one of the horses must win” Joey Adams (1911-1999) US Comedian “Goddammit, I’m a billionaire!” Howard Hughes (1905-1976) US industrialist, on being referred to as a ‘paranoid, deranged millionaire’ by the press “The meek shall inherit the earth, but not the mineral rights” John Paul Getty (1892-1976) US oil billionaire “The best way to tell gold is to pass the nugget around a crowded bar, and ask them if it’s gold. If it comes back, it’s not gold” Lennie Lower (1903-1947) Australian journalist “Nothing knits man to man like the frequent passage from hand to hand of cash” Walter Sickert (1860-1942) British painter and writer “Put all your eggs in one basket, and then pay very close attention to that basket” Warren Buffett (1930-) US investment expert Finally, one that sticks with me: “Quitting whilst you’re still ahead is easier than quitting whilst you’re still behind”

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t s e v n i T R A

ive extens has of m e a d te a Our the tr ll in are a ence rtners experi a p rt r d ou the a art an s in rt e p x d e certifie . world d ore an e a m m ss o c la e c s b asset Art ha nded to a e m ic e d r serv more at you rt o re p a p u e the s and w in u with ta o y in a e and m provid d il u r b fo ed to tion you ne collec t n e ny. xcell ompa an e your c r o lf e yours lients t our c e assis w ion o d ly extens Not on n and o ti lso a a re e c s, w in the ortfolio p ew rt n a ir identify of the d n unities h a opport researc c ti is e rt and a rge th artists ay me m e e th t w ll as so tha as we . n s o rt ti cia effo appre e of all ic sens m o n o ec ssion. n a pa a th re rt is mo for the iation To us, a c re p rdinary e ap extrao It is th e th ge n of owled creatio the kn h t it w benefi ined comb ents to li c r u w o to allo nt. ch tale u s from

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planning

Planning for More than Three Generations Making sure that the wealth you’ve created remains a valuable legacy for generations to come is a tricky business, but worth considering sooner rather than later. I’m seeking compatriots in the battle to erase yet another inheritance myth, that old phrase “shirtsleeves to shirtsleeves in three generations.” That’s the old curse—commonly believed in many societies worldwide—that a family’s money is unlikely to survive beyond its third generation. Jay Hughes is one of my compatriots; he has what I consider a very helpful outlook on what it takes, starting with long-term thinking. Hughes cites a certain personal affection—one that transcends pure botanical allure— for the copper beech tree. As he explains, this particular tree is emblematic of a commitment to planning for more than today, more than one lifetime, and even more than 100 years: Think of the courage it takes to plant a tree that takes 150 years to mature ... someone must invest love and patience to nurture it. Think of the hurricanes, ice and snow, pests, and fire that may consume the tree while it is too young to withstand those hazards. It needs help to survive those threats ... As it matures, it has to contend with humans who want to cut it down for its wood, and with governments that want to put a road or a new housing development where it stands. The issues the growing tree faces parallel those in the unfolding life of a family. With stock tickers that change by the minute, daily market reports, and property values fluctuating more than annually, it shouldn’t be surprising that the world tends to take a very short-term view on finance. Where’s the nightly news story on the progress of a hundred-year investment plan? It would be like reading second-by-second updates on the progress of a snail crossing your lawn toward your gardenias. Revisiting for a moment the discussion on risk, there is a tendency to call certain very conservative investments, like government bonds, “zero risk.” When working with inheritors who want to

Accumulated wealth is a valuable legacy for our inheritors, but ensuring it keeps on working through further generations is a tricky business, as Myra Salzer finds out.

defy the shirtsleeves myth, I ask you to adopt a broad view of time, one that sees more than three generations into the future. That can be 100 years or more, the life of a copper beech tree and beyond. Looking that far ahead, I consider that there is no such thing as zero risk. Think about it: Governments have failed in less time, companies rarely survive a century, and even banks often vanish before your grandchildren are born (the understatement of the decade). So there’s an element of the unknown you need to consider when managing your inheritance: your wealth could, and should, still be around in a time of flying

cars and robot butlers. Have you started saving for your greatgrandchildren’s cyborg immune system upgrade fund? Have you factored in depreciation on your family’s Martian vacation home? I know all this sounds silly, but what would your great-greatgrandparents have said in 1904 about your plans to invest in a company called Google in 2004? “Can you tell me what they do again, sweetie?” The bottom line is that this kind of longterm perspective requires more than just financial modeling and precise asset allocation. You’ve actually got to look at the big picture of what you’re creating

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and which direction you hope it will go. I believe that we have a slim chance of guaranteeing a certain number of dollars or acres any time in the future. As just two examples of financial wealth, the value of money and of land—meaning their relative importance in our lives— just changes too much from generation to generation. What doesn’t change as quickly are our core values. Identify yours, then build an infrastructure to share them with future generations, and then you’ll have a model for long term wealth conservation. There’s no reason human values can’t drive wealth management more than

financial concerns. As markets rise and fall, people still seem to find meaning and direction in their lives. Put your money in service to your value system, and you’ll find it’s piggybacking on something far more predictable than the stock market. While this amazing tree is Hughes’ favorite metaphor and makes an appearance in both books, this particular quote is from Family Wealth, p. 13. Family Wealth—Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations, by James E. Hughes Jr., Bloomberg 2004.

our correspondent

Myra Salzer Founder The Wealth Conservancy Myra Salzer’s latest book, Living Richly: Seizing the Potential of Inherited Wealth is available from bookstores internet thewealthconservancy.com email twc@thewealthconservancy.com phone +1 303 444 1919

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VENTURE CAPITAL

Banking on Recovery Within the UK, the difficulties in obtaining funding for small and medium sized businesses are well known and documented. Despite protestations to the contrary, all the evidence is that the banks remain reluctant to lend, especially to smaller businesses and most other forms of funding are still stuttering following the credit crisis. The government has recognised this, stating in their Green Paper “Financing a Private Sector Recovery” that “the serious under-capitalisation of British small businesses, especially compared to their counterparts in the US….. needs to be addressed.” Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) are playing an increasingly important role in funding smaller, often fast growing, businesses. The tax reliefs available have made these particularly attractive for UK investors whilst the funds raised mean these investment vehicles are playing an increasingly important part in capitalising small businesses. The VCT sector raised £365 million in 2010/11, the fourth highest amount in the fifteen years that they have been available. Whilst this is still some way short of the record £779 million from 2005/6, this was the last year that 40% income tax relief was available for investing in VCTs. Since then, we have seen more and more restrictions on what a qualifying VCT can invest in, but at last the tide has turned as the Coalition government seems to be recognising the real economic benefits that can be delivered by a vibrant VCT sector. It isn’t just VCTs that are feeling the benefit of the government’s intent to deliver on its promise to promote access to equity finance for smaller and medium sized business. 76% of Business Angels use EIS for some of their investments already and this could well be the best year ever for these vehicles, thanks to changes announced in the most entrepreneur-friendly Budget for over a decade. EIS have benefited from an increase in income tax relief from 20% to 30%, bringing them in line with VCTs, whilst Angels will be particularly pleased with the increase in the annual investment limit (albeit not

David Thurlow, of corporate and private independent financial advisers Atkinson Bolton Consulting, discusses the difficulties of funding for small business in the UK.

“76% of Business Angels use EIS for some of their investments already and this could well be the best year ever for these vehicles, thanks to changes announced in the most entrepreneur-friendly Budget for over a decade.”

until April 2012) to £1 million. For Angels, the EIS structure looks more attractive than ever, with higher relief against income tax, protection against capital gains Tax and inheritance Tax and a minimum holding period of just three years. If 2011/12 provides excellent opportunities for UK investors to support small businesses through the use of EIS and VCTs, from April 2012 these vehicles will become even more attractive. A key constraint on the development of EIS and VCTs has been restrictions on the type of companies that qualify for the associated tax reliefs. Many of these restrictions have only been in place since 2007 (and only apply to new money being invested from then) as the previous Labour administration sought to curtail the tax reliefs being provided. However, research by the Association of Investment Companies (AIC) suggests that over 40% of businesses applying for funding from the VCT sector between 2000 and 2008 would breach the current restrictions. This is despite the fact that bank lending was much more readily available prior to 2008 and suggests that the funding gap could be at its worst for companies that are small, but too big to comply with all the current restrictions. There will of course always be some restrictions, but these are being relaxed in ways that will greatly enhance the appeal of both of these vehicles as a means

of providing tax efficient support to growing businesses. It is important to note that these relaxations are not taking effect until April 2012 as they will require approval from the European Commission that State Aid rules are not being broken. Whilst this is not expected to be an issue, approval cannot be taken absolutely for granted. So what is being relaxed? Investment managers running established EIS and VCT vehicles will be able to make follow on investments into successful investee companies, allowing them to support the growth of the best businesses they have invested in, to a much greater extent than before . Previously, companies with gross assets of more than £7 million were not eligible for investment by newly-raised VCTs or EIS funds. This ceiling will be raised to £15 million. At the same time, the permitted maximum number of employees in these businesses is to be increased from 50 to 250 and the annual investment limit into qualifying companies will be raised from £2 million to £10 million. The relaxation of the present restrictions will dramatically increase the universe of companies qualifying as investments of EIS and VCT vehicles, massively expand the level of investment available to small companies and provide a significant boost to the companies that, more than any other, are likely to drive the pace of economic recovery in the UK.

our correspondent DAVID THURLOW director Atkinson Bolton Consulting Atkinson Bolton provides independent financial advice to companies and planning and wealth management services to private individuals. internet atkinsonbolton.co.uk email david.thurlow@atkinsonbolton.co.uk phone +44 (0)845 458 1223

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: Y O B CITY T X E N THE R E T P CHA Story by Rob Grainger

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Geraint Anderson and his alter ego ‘CityBoy’ with the city of London

rom hippy to city analyst to author Geraint Anderson AKA CityBoy has been something of a phenomenon in recent years. His comments have often enraged London’s banking community who see his betrayal as nothing short of unforgivable. Breaking the perceived ‘code of silence’ for the city isn’t likely to win anyone friends and he’s been criticized from all quarters for being a hypocritical self-publicist. But hold your judgment for a moment and let’s take a look at the journey that brought Geraint here, sitting opposite me with a friendly smile and a beer in his hand. Born to a father who was an oldschool left wing Labour MP and a deeply religious mother, whose parents had been missionaries you’d be right to think that Geraint would have been more likely to be found leading a group of anarchic squatters into your empty pied-a-terre than heading up a highly successful team of analysts. Life could have easily dealt a different hand but for a concerned brother, who was himself a fund manager. Geraint had been studying for his Masters Degree at Sussex University with a plan to travel, smoke dope on a beach and sell trinkets to tourists. His ‘life plan’ had clearly set alarm bells ringing with his brother who suggested that he finish his studies, come and take a job in the city, work for five years and put away £300k and then go and do whatever took his fancy. It’s an all too familiar story for those working in the city; I’ll go and work myself into the ground for five years, take the money and get out. As many of us know, it rarely works that way and fifteen years later there’s a big mortgage, school fees, a house in Tuscany to keep up and so the list goes on. And so he dutifully completed his studies and an interview was arranged with the Head of Research at SocGen. A brief peptalk the day before from his brother and an ‘interview’ in a city bar that left him

staggering home culminated in a job offer from SocGen. That was 1996, a time of continued boom in the financial markets, a time when the gravy train was seemingly endless and excesses were the norm. What could possibly go wrong? Fast forward ten years and we find Geraint working at Dresdner Kleinwort leading a highly successful team of utility sector analysts, ranked second highest in the city, and he’s personally ranked as one of the top five analysts working in London at the time. That’s a pretty impressive career for a guy who had planned to sell trinkets, so what was the secret of your success as an analyst? “I was told very early on in my career that a client who thinks you’re a friend is going to give you much more business, so I went full on taking clients to concerts, strip bars, parties in Vegas or Miami and so on, and it paid off. Although my liver and nostrils took a battering.” So how did you feel about the work, given that it had been your intention to have five mercenary years and then exit? “For me it felt like the equivalent of taking up drug dealing for five years, I’d gone into something I’d felt was morally dubious to make some fast cash before getting out and doing something more fulfilling and worthwhile with my life. Obviously after five years of doing this I was earning £300k a year plus sizeable bonuses, my pay rises during that period of madness were spectacular and at the age of 29 I got caught in that cycle of hanging in there for one more year. I’d become like one of those bank robbers in an old film-noir who keeps saying ‘I’ll just do one more job’, I kept hanging in there thinking I’d take one more bonus and then make my escape.” Did you get the feeling that your colleagues were following the same life

plan, earning fast and getting out whilst the going is still good? “Very much so. Most of my contemporaries were in the same boat and we’d all said we’d do it for five to ten years and we generally agreed that the amount we’d need to accrue would be £2.5m in net assets in order to get out, retire or do whatever we wanted with our lives. I managed to get out, by chance and good fortune, but many are still there and that’s their choice. It’s a very seductive business and it’s a hard one to leave. You try leaving a job at 29 when you know your next bonus is likely to be not far short of £300k and you have no alternatives.” So what were the deciding factors for you when it came to resigning your position? “I did have some serious misgivings, especially as things got wilder and wilder in the city. I started getting asked quite blatantly for inside information, never over a recorded line, always over a lunch or a mobile phone. It was becoming, to use a cliché, like a wild west casino. At that stage my leftie, hippy, religious side started to rear its ugly head and so when the opportunity came to expose the seedier side of the business with an anonymous column in The London Paper I leapt at it. I suppose it was a bit like a Catholic needing a confessional, I wanted to get things off my chest and these 500,000 readers who read my musings every Friday were like my therapist. I was struggling to reconcile my own views with the seductive draw of large amounts of money. By the end of my career my last two bonuses were over £500k and that’s difficult to walk away from.” Did you struggle with the anonymity of being CityBoy? “Big time! The column ran weekly for almost 2 years before I finally came out into the open. A few friends outside the city knew, but occasionally I’d get a bit too

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“I was never that extravagant because I’d assumed from the very beginning that I’d be found out, I had the all too common imposter syndrome and expected at any minute that someone would point out that I was a total fraud, then finally I realized that everyone feels the same”

drunk and someone would say ‘who do you think CityBoy is?’ and now and again I’d shout ‘it’s me!’ and a few people would eye me suspiciously and say they’d suspected me. Some of the anecdotes I’d included in the column were obviously mine to those who knew me well, despite the fact that I’d tried to change the circumstances. Bear in mind that I often wrote the column at work, my secretary found my column on the photocopier on one occasion and gradually there were more and more people entering this bizarre inner circle of trust. Freud would say that I’d been hoping to be caught and fired, and he’d have been right. By that time I’d already been approached by a publisher to turn the column into a book and things were starting to snowball.” I read the column regularly at the time, partly because of the way it was written and partly because of the way it blew the lid a bit too much on what was going on in the square mile at that moment. There were occasions when you did get a little bit close to the bone and I suspect the newspaper’s proprietors were fielding calls from their own legal team. “The column was intended to add a bit more colour and expose some of the dubious practices which were rife at that time. The last five companies to be taken over in my sector (UK utilities) in that period all had such a marked buying of the shares that the takeover panel had forced the management teams to issue statements to say that they’d witnessed an increase in share trading and they had received an approach that may or may not result in an offer. Of course the interesting thing about the UK water and electricity 64

companies was that the private equity firms had totally got involved in them and had started offering preposterous premiums to their regulatory asset value. The very fact that the announcements had to be made was a tacit acceptance on the part of the regulators there had been a massive amount of insider trading. The city operates on a risk and reward basis and if the risk of getting found out, in these situations, is almost zero and you can see a 25% increase in your capital over the space of a week then we all know what the outcome will be. Towards the end of my career I’d regularly and blatantly be asked for inside information by hedge fund managers. A proportion of that was inevitably going to seep into the column, and it did.” Like a lot of people, I also suspected that the column was being written by a disgruntled financial hack. The writing seemed a bit too polished to have come from a real CityBoy, or am I being unfair on our hardworking friends in the city and Wall Street? “That’s very kind! The moment I saw my first column I was so pleased, but it also set me thinking. It’s a tragedy in some ways that there are so many wasted talents in the financial sector; artists, scientists etc who have gone into this business because of the money and that leaves us with a lot of frustrated people in the city who’ve been seduced by the large banks at graduate fairs with the promise of large amounts of money. Whether you think that’s right or wrong doesn’t matter, the real tragedy is that so many of these people should be elsewhere finding a cure for cancer, solving

global warming or doing something more beneficial rather than pushing around bits of paper all day. I took part in a debate at the Oxford University Student Union a couple of months ago and whilst I was there I was talking to some of the students, one of whom is already a leading physicist but they all seem to be going off to Goldman Sachs and Merrill Lynch. I’d have no leg to stand on if I tried to dissuade them, but it is a real shame.” As a successful columnist I guess a book deal was inevitable, how did that deal play out? “I’d been writing the column for around four months when I was approached by a book publisher to turn the column into a book. At that stage I couldn’t see where I’d find the time, but then fate conspired yet again and I had a motorbike crash in August 2007, which left me laid up for 6 weeks. It seemed like the right time just to get on and do it. I finished writing the book by early December, which meant that once I’d gone back to work in September I was spending my weekends writing furiously at a rate of 2,000-4,000 words a day, it just came out of me at speed.” What were the legal issues involved with the first book (Beer and Loathing in the Square Mile)? “The publishers lawyers were all over it, as you can imagine. They were very cunning though and classified the book as fiction. Everyone knows it’s pretty much true. Each chapter is named after a character and most of my contemporaries in the city know who these characters are in the real world. I did change names and

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appearances and the book has disclaimers, yet booksellers seemed happy to place this in non-fiction.” So, what’s the next book got in store for us? “The next book is published on June 9th and the central character remains the same, although this is very much a work of fiction. I can assure you I have never been chased around by Colombian drug barons myself.” We see it time and time again in all sorts of high earning professions where successful young men and women lose their huge incomes and find it hard to cope. How did you deal with the transition? “I was never that extravagant because I’d assumed from the very beginning that I’d be found out, I had the all too common imposter syndrome and expected at any minute that someone would point out that I was a total fraud, then finally I realized that everyone feels the same. In the meantime I’d been sensible about money, I was still driving around in my old Vauxhall Cavalier and I made sure my house was mortgage free. Money should give you freedom, but it can also end up trapping you in a gilded cage in a relentless cycle of ever increasing bills, mortgages and school fees for the kids.” I’ve crossed paths with Geraint a few times over the years, the last time being July 2008 after his retirement from the city. He seems to have mellowed considerably, which is partly due to recently getting married and being an expectant father for

the first time and also seemingly partly as a result of being further away from the pressures of his past career. A change of pace can do a lot for a man, but it would be wrong to assume this CityBoy has been idle for the last three years. Since walking out of Dresdner Kleinwort three years ago he’s had his book published, appeared all too regularly on our TV news screens every time the banking industry is mentioned. Recorded and released his own song ‘CityBoy’, continued with columns for various magazines, met his wife and got married. Aside from all of this I’ve been most impressed with his fundraising activity for the Mutaro School in remote Kenya. When I question him on the project he looks a little uncomfortable, as though he’s not sure whether this is the right time or place to be discussing this, having spent the last hour telling me how he’s enjoyed a high earner lifestyle for so many years. This is all too common for people who are working or have worked in high earner positions, it’s an uncomfortable position to be placed in when you’re asked about what you’ve given back and I’ve seen it frequently. In the US things are entirely different, but in London there’s a distinct embarrassment associated with discussing charity. I press on, keen to find out more: “A friend of mine, Sophie Barker, had mentioned this project to me, a school which was falling down in Kenya. It struck a chord with me as I’m a strong believer in education as a means of getting people out of poverty and this seemed like an achievable goal. I decided to put some of my own money into the project and help

with fundraising activity in the form of a party. We managed to pull together £35k which goes a long way towards rebuilding this school, but we still need more. I made the trip out to Kenya to visit the school in November 2008 and it was incredible. Some of these kids walk 2 or 3 hours each way to get to the rundown school. When you compare that to the attitudes we have to education in this country it’s crazy. These kids are crying out for it, they’re desperate to be taught because they know it’s their means of escaping poverty. Some might think I’d sold my soul to the devil and now I’m trying to buy it back, and they wouldn’t be too far wrong. I do feel a responsibility to give something back and to be involved in that process.” Those who meet Geraint tend to take an instant liking to him and whether I agree with his very public stance towards the banking industry or not, I can say that he’s a very likeable guy and his heart’s most certainly in the right place. Here’s a man who expresses no regret for his career choices, yet criticizes his past masters. Here’s a man who openly criticizes remuneration systems in the banking industry, whilst having benefited greatly from them. He’s honest enough to admit his own hypocrisy, and I suspect that’s why so many people do find him enormously endearing. He’ll tell you there’s more to life than money and battling the stock market, but that’s just his opinion. Geraint Anderson’s new book ‘Just Business’ is published on June 9th and details of the Mutaro School Project can be found on the website www.cityboy.biz and I’d urge you to take a look. 65

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E T E L P COM N O I T C E PROT 66

Story by Mowbray Jackson

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Corporate and private security. Are you looking after your interests and family?

ealth management can also mean protecting your wealth and avoiding unnecessary vulnerability. Mowbray Jackson takes a look at the world of private and corporate security. A high-flying business executive, who was looking to develop a business opportunity with a private security company (PSC), asked them to supply a close protection team of two to accompany him to Prague for a long weekend. On the first evening, while they were walking to a restaurant, some fireworks went off very close to them. Before he knew it, the client was on the ground being ‘protected’ by his Close Protection Officers. Unfortunately, during this ‘rescue’ his suit was ripped and his shoes scuffed. He was also physically shaken up. As a result of this overreaction the PSC was not employed. The client was never under threat and the team displayed a total misinterpretation of the episode. This possibly apocryphal story perfectly illustrates the difficulty of finding an appropriate security company or consultant who understands the client’s needs sufficiently, and displays a complete failure to grasp the client’s real needs. The saying goes that a company’s

greatest and most valuable assets are its employees and as such the employer has a duty of care to them. This is an obligation, which, if not upheld, can lead to numerous problems for the company. Its success is underpinned by its assets, and protecting them in hostile and complex business environments is vital to its competitive advantage and longevity. Whilst body-guarding or Close Protection (CP) is the more dramatic and noticeable side of executive security, other aspects of the business are evolving and growing rapidly. Even though 9/11 and post bellum Iraq has brought Private Security Companies to wider notice (much of it less than positive; Blackstone springs to mind) and alerted corporations to the importance of ‘Security’ some PSCs were well established before these events. With the rise of globalisation companies have become multi-national in global reach and culture. As they established overseas interests in emerging markets, which by their very nature occur often in inhospitable and hostile environments, the need for PSCs grew. Insurance companies were the first to take an active interest in building up Risk Assessment and Business Resilience. In

the 1970s, the kidnapping of international businessmen was becoming rampant in South America. For Lloyds brokers Hogg Robinson there was a real demand for professional advisers, and Control Risks (CR) was born as a subsidiary. This company looked to minimise Hogg Robinson’s exposure, assess the risks, and ‘manage’ kidnappings, ransoms and incident response. CR rapidly became the leaders in the field of Kidnap & Ransom (K&R). Andreas Carleton-Smith is Global MD at Control Risk and personifies the typical Security industry professional. A former SAS officer, where his responsibilities included commanding elements of the UK’s counter-terrorist team, he was awarded the Military Cross for gallantry in Bosnia and after leaving the army became a specialist K&R negotiator. Proof of Life, a movie starring Russell Crowe, about a K&R situation in Latin America, was loosely based on a real-life situation brokered by Carleton-Smith (who, while enjoying the movie, emphasized that it was “pure Hollywood fiction at its best.” ). He points out that faltering governments, rioting citizens, protesting students, armed hijackers and even hired kidnappers are just some of the dangers

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Contacts:

business executives might encounter as they crisscross the globe in their modern travels. And not just business travellers are exposed to the perils of insurgencies abroad. More and more frequently, unprepared workers for NGOs and relief agencies are finding themselves caught up. Take Tamara Shetler, public relations director of a nonprofit medical relief agency in 1993. Having been charged with travelling overseas to gather information on the status of far-flung programs, she had imagined herself journeying to exotic places and experiencing fascinating cultures, and was delighted to find herself in Haiti. Completely uninformed about the society into which she had been plunged, she did not expect, on her second day there, to be lying on her stomach, pressed between the wall and the bed, shivering with fear as bullets whanged and thudded onto the balcony of her room at the Holiday Inn. She had put the pops and bangs down to the Carnival celebrations: she had never thought that her life would be in danger. Despite these horror stories, as both Carleton-Smith and Mike O’Neill of Optimal Risk Group are keen to stress, being kidnapped or becoming a victim of

Mike O’Neill FSyI CPP PSP Optimal Risk Group SoanePoint 6-8 Market Place Reading, RG1 2EG United Kingdom

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piracy is unlikely. All statistics indicated that the businessman today is more likely to become a victim of internet crime, burglary and road traffic accidents From its early beginnings the concept of risk and security has moved on rapidly as globalisation has changed the structure and pace of corporate life. The saturation of traditional markets is taking companies to more risky places. Such things as the shift towards a knowledge economy (which is eroding the importance of ‘place’ in the business world) and new business practices, such as off-shoring, challenge companies to manage at a distance, while new forms of accountability, such as corporate governance and corporate social responsibility, put pressure on companies to match their words with deeds, wherever they are operating. And new areas have opened up, not only on land, but at sea and in the ether. In 1816, when North African pirate ships were rampaging throughout the Mediterranean, Lord Viscount Exmouth could sail the British fleet into Algiers and bombard it, as reprisal for the piracy which had been instigated by the Bey. Alas, such straightforward action is no longer acceptable and evil doings upon the high seas are becoming ever more prevalent.

The purpose of piracy is to get ransom money for release of the crew, ship, and cargo. The pirates’ income from ransom estimated to be about $58 million in 2009, rocketed to $238 million in 2010. A recent report published by Geopolicity Inc. asserts that piracy is an emerging market and was valued at between US$5-8 billion last year alone. It appears that the only success against these modern day depredations have been when shipping companies have employed the services of armed PSC’s who can deter and drive off the pirates. Ship owners, originally reluctant to have armed guards supplied by PSCs aboard their vessels, have finally awoken to this threat and Maritime Security is the fastest growing sector in the Security Industry. Similarly, the threats posed by cyberspace have become massive. Individuals are now able to wreak havoc with amazing ease. The Wikileaks phenomenon is well known to everyone. The fact that a low ranking disgruntled lovesick private soldier, Bernard Manning, sitting in a bunker in Iraq was able to steal highly confidential top-secret documents let alone read them is almost beyond comprehension. There, he had access to the Secret Internet Protocol Router

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Network (SIPRNet), used by the United States government to transmit classified information. Apparently he shared this ‘secure intranet’ with as many as 3 million others. So much for secure. This massive failure was followed by the former Swiss banker cum data thief Rudolph Elmer, who inflicted great damage when he stole two disks from his employers Bank Julius Baer and passed them on to WikiLeaks amongst great publicity. A further extension of this is the recent furore regarding phone hacking which has disclosed a further tranche of candidates for protection, alerting many ‘celebrities’ to a previously unsuspected threat. Although one worm has turned, in the shape of Hugh Grant (see his New Statesman article “The Bugger Bugged”), others are too fearful to say “Publish and be damned”. Publicity may be as necessary to them as breathing, but they cannot accept the insults to their families, and most of all their children, to whom they feel as protective as any other parent. Corporate security’s job is to identify and effectively mitigate or manage any developments that may threaten the resilience and continued survival of a corporation. Its umbrella covers the close

coordination of all functions within the company that are concerned with security, continuity and safety. The development of such lifestyle security is on the rise and many companies are developing security lifestyle plans. A typical PSC operates internationally supplying a range of security and risk management services to clients, which may include Global 500 companies, multinational corporations, international finance houses, law firms and high net-worth individuals. It supplies and deploys security teams abroad to provide an integrated and fully managed response to all issues, its teams providing a combination of services, including personal protection, security drivers, physical security, liaison with local law enforcement agencies and training of local security staff. It is also active in aviation and marine security. Such a company is Mike O’Neill’s Optimal Risk Group, which has responded to rising demand by offering solutions tailored to modern-day requirements on a more intimate scale aimed at celebrities, footballers, high-flyers, and top executives who feel the need for protection in such fields as Home Life, Work Life, Family Life, and Digital Life. Security can be assured on the basis of a

monthly subscription, and the company’s aim is to ensure, for example, that: You are safe and secure in your own home; you are protected from fraudulent associates or business opportunities; your family and employees are safe working in the home; you are protected from paparazzi; you and your family are protected travelling abroad; you are protected from stalkers; you are shielded from digital hacking and interference. The company’s priority is that its members’ families receive the same level of protection as the members themselves. Whether at home or abroad, it ensures that its members and their families receive the advice and support they need to be safe at all times. It offers full confidentiality and provides its members with training, so that each has the knowledge and ability to respond to a range of potential threats, equipping them with personally tailored skills to deal effectively with many dangerous situations they may face. Employing the services of a Private Security Company is becoming more common, and to avoid becoming the victim of a serious event whether it be physical, electronic, cyber, or economic. More serious, in fact, than a pair of scuffed Gucci loafers, a ripped Italian designer suit, and damaged pride.

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swiss buying guide

Story by G. Patrick Gruhn

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t is quite common that a foreigner will arrive in Switzerland and within very little time become enchanted by the landscape, the infrastructure and safety of the country and once that occurs, there are companies like Rayan Partners, an elite VIP Service on the Swiss Riviera (www.rayanpartners.com) that’ll make sure you get exactly what you want. In general, a company spokesperson explains, the first questions that we get are about prices and limitations of foreigners purchasing in Switzerland. The country’s regulation clearly distinguishes between three types of foreign buyers: the nonresident (who is basically a tourist); the holder of a “B-Permit” which is the limited authorization to live and work in Switzerland for one year (subject to annual renewal) and finally, the holder of a “C-Permit” which is the equivalent of the American Green Card. The tourist is allowed to buy only small properties that have been authorized for the sale to non-resident foreigners, the quotas a very limited and demand is quite high. The holder of a B-Permit is allowed to purchase a bigger spectrum of

properties, ranging from apartments to small houses but is usually limited to a primary and secondary residence and a certain number of square meters (generally not more than 200m2).The holder of a C-Permit is in many ways regarded as a Swiss citizen (except the right to vote on a national level). That said, the holder of such a permit can acquire any kind and any number of properties, freely across the country with no limitations whatsoever. Buying real estate in Switzerland is subject to a number of laws, most notably “Lex Friedrich” which governs what a foreigner may and may not acquire. As Switzerland is divided into 26 cantons, these function like mini-countries with their own laws and regulative authorities. In that sense, the process of purchasing property varies in each canton. One of the things that is mandatory in most cantons is an approval from the Justice Department and the police who check the client to the best of their knowledge. This approval is generally obtained through the notary during the course of the purchase. When wanting to buy property, many clients ask if that automatically entitles them to a residency permit and the fiscal

advantages of the country. The answer is no. Whilst the client will have to pay a number of different fees every year. he or she doesn’t automatically acquire the right to live in Switzerland. As an example, a property will generally cost around 1% annually in up-keep and between 1 1.5% in property taxes (or as it is called wealth tax). Acquiring a property is also not cheap as the cost of purchase varies between 3-5% (that is without brokers commissions because in Switzerland the seller pays the commission) in short, if you buy a flat for one million francs you’ll pay about 20-25k in annual fees and 3050k upon closing. When it comes to financing a property, Swiss banks will generally lend between 60-80% of the value they internally assess. This is a rather defensive approach by the banking system and protects both parties in case of default. At present, with interest rates at a record low, it is fairly common to find a long-term rate around 3-3.5% per annum (interest only) A word of caution to investors, the Swiss Franc due to its refuge-character is unusually strong at present and some highdemand markets such as Geneva are over-solicited and therefore are showing signs that could be compared to a bubble. 71

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“Buying real estate in Switzerland is subject to a number of laws, most notably “Lex Friedrich” which governs what a foreigner may and may not acquire.”

It is not likely that prices will crash but if you are expecting a bargain then it is best to look in the agglomeration of the big cities which may mean less prestige but a much safer investment and actual long term profit potential. When it comes to choosing a location, a canton, based on the degree of difficulty to « get in » there’s no straight answer as there are many variables in play. It is however safe to say that there is something of a “battle” going on between many cantons, its a healthy competition for foreign capital. That said, some of the hardest places to acquire property are Geneva and Vaud (also Valais in terms of the prestigious ski resorts like Verbier or Crans Montana). Prices have soared but there’s no end of the demand because the quotas for foreigners are very limited. That said, there are cantons that are welcoming foreign capital but are not very attractive or prestigious to live in but they are still not easy to get in to. Generally speaking, the more known a canton, the harder it is to buy property there let alone obtain a residential permit. Do’s and Don’ts Like in every healthy business, the Swiss real estate market is very profit oriented. Foreigners are easily perceived 72

as extremely wealthy and therefore are asked to pay higher prices. The general absence of local market knowledge of the potential buyers, leads sellers to believe that the foreigner is an easy target for a quick, additional 10-30% or even more. Therefore, it is highly recommendable to either deal with a number of local service providers (brokers) to make them understand that your business is subject to the best deal (competition) or if you have a trusted counterpart in Switzerland who will represent your interest and support you with the necessary local market knowledge. It is also a common misconception that the Swiss real estate regulations and laws for foreigners can be circumvented by simply setting up a company that’ll acquire the property in their stead and the buyer owning the company instead of the property itself. This approach is clearly prevented by the law and in the process of setting up a company you’ll be asked to sign a legal document stating that you don’t intend to buy property. The authorities can nullify or even reverse concluded sales and substantial penalties would likely be issued. As previously mentioned, don’t think that buying a property in Switzerland entitles you to a residential permit or

any fiscal advantage - these are two different things and since there are a lot of wealthy individuals looking to buy / invest in Switzerland, just having money is not a criteria any more. Regulatory framework Buying property in Switzerland has become easier for citizens of the E.U. as Switzerland is moving closer and closer to the union in order to avoid political isolation. This is tricky because politicians walk a very fine line between isolation and upholding the country’s status quo. That said, with demand as high as it has been for the past years, there’s no reason for the highly conservative majority to change anything, mainly based on the fear that this tiny country could quickly be all “sold out”. Regulators are very cautious and aware of the fact that rising real estate prices strongly affect the cost of living - meaning that it may not matter to the foreign billionaire if he pays 10 or 15 million for a prestigious estate but it matters to the millions of Swiss who want to buy their home but can’t because the prices per square meter are soaring out of proportion. If anything, it seems likely that regulations could possibly be tightened to protect the country’s citizens.

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Mind Control Has the future arrived? We have a look at the newest controller for your computer, the MindWave.

Back in the day, when I was a small boy, I used to daydream about future technology and marvel at the TV shows giving me glimpses into a distant way off world where everyone had their own robot, video cassettes were the size of a box of matches and bank-robbers used laser guns instead of live rounds. I couldn’t wait to travel into space and live in a world where we all used the same currency and ate genetically modified steaks from cows the size of the San Siro. The nearest I got to imagining the scale of possibility was seeing Michael J. Fox in Back to the Future. For me the dream was three giant advancements in technology: 1. Teleportation 2. Artificial Intelligence 3. Mind control Technically there were four, but I’m not counting X-Ray vision. I’ve been waiting a long time for these and science has not been moving anywhere near quickly enough for my liking, until now. Can you imagine how excited I was to hear about The MindWave headset this week? I almost soiled my carbon fiber underwear just at the mere suggestion of a headset that reads brainwaves and allows the user to control electronic devices and machinery. That’s right, it’s here and unbelievably it’s less than €100. Who’s with me on a trip to the future? The MindWave headset is able to read the electrical signals naturally emitted from the brain and recognizes patterns of brainwaves that relate to certain mental states. Don’t be fooled by the impossibly low price, this piece of kit has recently broken the Guinness World Record for the largest object moved using a brain

– computer interface. The creators, NeuroSky, teamed up with Loughborough University and The Gadget Show used the technology to control a 56 tonne crane to move a Volkswagen using a giant magnet. The software, which was engineered by NeuroSky partner Steve Castellotti, allowed the Gadget Show hosts to use a combination of concentration and eye blinking to move the crane forward/backward, up/ down, side-to-side. He stated, “I was testing the crane using my own attention and focus the first time when the solution began to work. It was actually a challenge suppressing my own excitement to maintain enough concentration to keep the crane moving. When the Gadget Show hosts carried out the entire sequence for the actual record, all of us were delighted.” The technology has existed for a number of years for those with millions of dollars sloshing around in their pockets, but now it’s here for the wider market. The potential is enormous for the gaming and home entertainment markets in particular. Imagine film or gaming that tracked your brainwaves and adjusted the content to suit you. It’s unusual for me to be completely blown away by leaps in technology, but this is different. It’s not just the advent of the technology itself, it’s the price point that has me salivating. Making this product accessible immediately to a mass market opens the doors for movie studios and RPG developers to take their own giant steps forward. This one’s ticked off the list so perhaps now they can get on with developing my teleporter whilst I’m still young enough to make the most of it. For more information visit neurosky.com

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Details The lightweight, easy to use MindWave headset includes a bundle of 12 custom games. It is available on PC and MAC and retails at â&#x201A;Ź99 at NeuroSky.com. Additional games and applications can be downloaded too. The MindWave includes NeuroSkyâ&#x20AC;&#x2122;s ThinkGear technology, which uses EEG (Electroencepalography, seriously) from a single sensor to record brainwaves and outputs the data as proprietary algorithms (for focus and relaxation), power spectrum bands using FFT distribution (alpha, beta, theta, delta and gamma) and the raw brainwave (including muscle movement such as blinks).

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ABF: The Soldiers’ Charity The last 20 years seem to have involved an almost continual mobilization of NATO armed forces moving directly from one conflict to another.

From Bosnia, into a Gulf War, another Gulf War followed by further conflict in Afghanistan and now, seemingly, in North Africa. With so many young men returning home injured, disabled and without a future military career it’s vital that these ex-servicemen are given our full support in helping to rebuild their lives. For over 65 years The Soldiers’ Charity has been providing a lifeline of continued support to serving and retired soldiers. Recent conflicts have seen this charity busier than ever with requests for assistance from soldiers increased over 30% in the last two years it’s clearly vital to increase fundraising. Corporal Andy Reid has served for 13 years with 3rd Battalion The Yorkshire Regiment. He is currently in rehabilitation following the severe injuries he received by an IED while serving in Afghanistan during the autumn of 2009. As a result of the explosion he lost both legs and his right arm. He is receiving on-going treatment for his left arm, which was also damaged and now fitted with a metal plate. Currently on sick leave, Andy says his main focus now is getting better and working on his fitness. In order for him to recuperate at his home in Lancashire there was an urgent need for a wheelchair ramp and some other adaptations before he could gain access to the house. ABF The Soldiers’ Charity was able to make an immediate grant to cover the cost of this installation. Andy is now an Ambassador for The Soldiers’ Charity and has spent the past year planning bigger and better fundraising challenges. At present The Soldiers’ Charity raises £7m a year to meet the needs of these servicemen, but this amount will need to be increased through necessity to £14m within four years.

Much of this funding is generated directly from events organized by the charity themselves including The Big Curry, a month long fundraiser in April where the public are encouraged to host curry nights and organize curry themed events to raise money. It’s a great idea and five years on from launch it’s grown enormously in popularity. The consequences of conflict and bereavement are far reaching and so many of us will have seen this at first hand. It’s vital that bereaved families are offered a support service to help them cope through difficult times. Families Activity Breaks (FAB) was created as a way of offering support to those who’ve lost loved ones in the military. Families who have children under 19 are eligible for these activitybased holidays which are specifically designed to help encourage self-confidence, resilience and peer support. These projects give a much needed respite to those grieving families and a chance to meet others who understand their grief. The Soldiers’ Charity has continued to support FAB with grants and in 2010 around 50 service families took a FAB holiday as a result. A huge range of on-going fundraiser events ensure that this worthwhile charity are able to support our servicemen and war veterans wherever the need arises, but with a rise in applications they will always need more support from us. There are a number of charities dedicated to helping ex-servicemen and their families, all of which do much needed work. The Soldiers’ Charity is a truly worthwhile cause and is always looking for new benefactors and fundraisers. If you would like to find out more about The Soldiers’ Charity or would like to make an immediate donation then visit the page online at soldierscharity.org

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