In the hall of Jacob Rothschild’s Victorian office at the Waddesdon Dairy in Buckinghamshire, a cow plastered with one dollar notes greets the visitor.
The glass-framed sculpture by British artist Justine Smith not only provides an example of Lord Rothschild’s passion and philanthropic support for art. Most recently, it has come to symbolise the 76-year-old’s investment strategy. “I think the United States has an edge. To have a strong presence in the US will be extremely important,” the chairman of listed investment trust RIT Capital Partners says in his first interview since the announcement of a tie-up with the Rockefellers this week.
As part of the deal, RIT Capital Partners will take a 37 per cent stake in US wealth and asset manager Rockefeller Financial Services and the two groups will co-operate on acquisitions and third-party investment funds.
What has been dubbed as the “Rockchild” union brings him together with fellow family patriarch David Rockefeller and creates something that his ancestors in the 19th century did not manage to establish: a strong foothold in the US.
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“They [the US] have been extremely fortunate in the discovery of these huge resources of shale oil and gas and they could well become the new Saudi Arabia for the next 50 years,” the banker and art collector says at the 19th century Waddesdon estate where he works every Friday to look after his philanthropic projects.
By contrast, his views on Europe are rather bleak. “We all know that Europe is going through a very tough period in the next five to ten years,” he says.
This is reflected in the investment focus of RIT Capital Partners, the vehicle in which he owns an 18.3 per cent stake. The trust has moved from an already minimal exposure to the euro to a short position in the troubled continent’s currency in the past financial year which ended this March, according to the annual report published yesterday.
This strategy could not prevent a 3.1 per cent fall in the trust’s net asset value in the past financial year that slightly underperformed its benchmark indices. Despite this, a capital cushion of almost £1.7bn and very little debt has allowed Lord Rothschild to embark on a global expansion strategy at a time when others were licking their wounds.
“We have become a less UK-oriented company and less parochial,” says the father of three daughters and of hedge fund manager Nat Rothschild.
In China, RIT Capital Partners has just announced the first closing of a private equity fund established with Creat Group, the Chinese investment conglomerate. And in Europe, a recent investment partnership with the Franco-Swiss bank Edmond de Rothschild will strengthen the family ties and allow both sides to interlink on investments and third-party funds.
The move demonstrates how Lord Rothschild has become more interested in recent years in reuniting a banking dynasty that started two centuries ago when Frankfurt-based Mayer Amschel Rothschild sent his sons to Paris, London, Naples and Vienna to create what became known as “the world’s banker”.
Five years ago, he re-established contact with Sir Evelyn Rothschild, his cousin and former head of NM Rothschild, the UK-based investment bank. They fell out with each other in the 1980s when Sir Evelyn took over at the helm of NM Rothschild, prompting his cousin to start his own ventures.
“I do regret that the parting of the ways was not an amicable one. But the way it turned out has been a happy and more interesting one both for Evelyn and me,” he says.
He says Sir Evelyn invited him to dinner just this week. “We have an extremely good and close relationship, Evelyn and I.”
Despite his age, the energetic Lord Rothschild makes every impression that he wants to carry on as chairman of his investment vehicle for many years.
But he also has a strong line-up of successor candidates from within his family, such as the “brilliant entrepreneur” Nat as well as his “extremely able” daughter Hanna and his nephew James who are non-exececutive directors of J. Rothschild Capital Management, RIT’s management company..
Lord Rothschild welcomes a move by his Paris-based relative Baron David de Rothschild to bring together NM Rothschild and the dynasty’s French banking group under one roof.
A reunion of all of these sprawling family ventures could be a – albeit distant – possibility. “You have a lot of Rothschilds around and the world changes fast so you never know,” the family patriarch says.
Rothschild clan moves to cement its grip!
David de Rothschild takes strength from family ties
More than two centuries after his Frankfurt-based ancestor Mayer Amschel Rothschild sent his sons to Paris, London, Naples and Vienna to create what became known as “the world’s banker”, Baron David de Rothschild is set to close the final chapter in the reunification of his sprawling family dynasty.
The 69-year-old chairman of the Rothschild group is bringing together its French and UK assets under the roof of Paris Orléans, a French listed entity with its roots in a 19th-century railway company.
The move will mark the last step in a process that started a decade ago of integrating the French banking operations with NM Rothschild, the UK-based investment bank that rose to fame in 1815 when Amschel’s son Nathan Meyer Rothschild made a fortune buying British government bonds in anticipation of Napoleon’s defeat at Waterloo.
In the 19th century, the House of Rothschild could thrive as a loose European partnership that financed states, companies and armies throughout the continent. But Mr de Rothschild’s reorganisation highlights the fact that in today’s world, a banking group cannot afford to operate as a network of sporadically aligned regional fiefs.
“To improve the performance of the group, we need to bring it under one umbrella,” one person close to the family says.
For one thing, the bundling of the group’s shareholdings under a common roof pre-empts a future regulatory regime that penalises minority stakes with high capital requirements.
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But the main goal is to cement once and for all the family’s grip on the business, and with it the dominant position of the two French family branches of David and Eric de Rothschild.
The new company structure will be a limited partnership that acts as a safeguard against takeovers by giving the family a 57 per cent share in the voting rights, regardless of the size of its stake in Paris Orléans, which will be 48 per cent after the reorganisation.
The reorganisation of assets, once completed, would double the market value of Paris Orléans from €550m to more than €1bn.
It reflects David de Rothschild’s determination never again to give up family control. This had become his raison d’être ever since his “traumatic” experience of seeing the family’s French bank nationalised by François Mitterrand in 1982, an act that prompted this bitter response from his father, Guy de Rothschild: “A Jew under Pétain, a pariah under Mitterrand.”
David de Rothschild launched a new French bank in the same year and focused it on advisory and asset management instead of the lending business that dominated its predecessor.
He started the integration of the group nine years ago when the French and British banking operations were unified, and he took the helm of the combined group and its UK branch from his cousin Sir Evelyn de Rothschild.
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In 2007, the French family branches took majority control of the Rothschild group when Sir Evelyn sold his stake, leaving his two sons and one daughter with a third of the group’s shares.
Holding the sprawling family together has never been easy. Another Rothschild descendant, Nat, eschewed the family group and joined hedge fund Atticus. He made headlines this year when he was almost ejected from the board of Bumi plc, the London-listed Indonesian coal mining group he helped create.
A few decades earlier, his father, Lord Jacob, fell out with Sir Evelyn and created his own investment trust, RIT. He recently strengthened the family ties through a partnership with another arm of the dynasty, the Franco-Swiss Edmond de Rothschild bank.
Edmond de Rothschild’s private bank is separate from the Rothschild group, but it will have a 6 per cent shareholding in Paris Orléans after the reorganisation.
Two years ago, the Rothschild group – for the first time in its 213-year history – appointed a non-family member, Nigel Higgins, chief executive for its UK operations. Mr Higgins will be joint chief executive of the merged family entity alongside Olivier Pécoux, head of Paris Orléans.
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One Rothschild banker said the public perception that the group would only now be unified was wrong: “The businesses have been glued together for a decade.”
On its management committee, French and UK bankers are a minority among a string of other nationalities, reflecting its rapid global expansion in the past decade.
Another banker said one crucial element had been missing at the investment bank: a common bonus culture. Before the pending reorganisation, French investment banking partners worked for a different entity, Rothschild & Cie Banque. This sometimes created tensions when partners from London and Paris where co-operating on cross-border transactions but had different economic rewards from the deal.
“This is the final piece in the jigsaw puzzle to make the business truly integrated,” the banker says.
But while its Paris and London operations seem to work together well, some cultural acrimony remains.
“There is no obvious French domination. The takeover of control has been done in a quite subtle way,” one London based banker says.
He adds that the UK bankers have always had to fight much harder to earn their business than their French peers, which have a dominant position on their home turf. “They have got a splendid business and they know it.”
Rothschild’s French arm has in past decades usually taken one of the top three slots in mergers and acquisitions advisory league tables. Last year it ranked in third position, according to Thomson Reuters, while NM Rothschild in the UK only managed eighth place.
The banking group as a whole stayed profitable through the financial crisis, thanks to its private banking arm and its counter-cyclical business model that combines restructuring and takeover advice. In its last financial year, its consolidated net profit rose €178.4m to €269.3m.
Paris Orléans’ net profit fell 20 per cent to €42.4m in the first six months of its financial year from April 1 to 30 September 2011, compared with the same period a year earlier.
For the full year to March 30 2011, net profit rose to €102.4m from €25.7m, helped by an exceptional capital gain of €33.1m, mainly due to the consolidation of Rothschild & Cie bank in the accounts.
For the urbane dealmaker David de Rothschild, there is one thing left to do: to secure a smooth transition of power to the next generation. His 32-year-old son Alexandre de Rothschild is working in the merchant banking division, and with his father retiring as chairman in a few years’ time, is seen as heir apparent.
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