Investment lessons from tycoons

Atletico Madrid's current team. PHOTO: Angel Guttierez. 
Atletico Madrid’s current team. PHOTO: Angel Guttierez. 

One of the advantages of family firms is that they can make decisions quicker than big shareholder-owned companies, which have to please or appease unaligned, incompatible groups of shareholders. It stands to reason that family investment vehicles make the decisions that institutions would, if only they were nimble enough.

So what lessons can we draw from the recent activities of families? Invest in Europe.

This week Dalian Wanda, the Chinese cinema and real group firm owned by China’s second-richest man Wang Jianlin, bought 20% of Spanish football team Atletico Madrid. Hong Kong tycoon Li-Ka Shing said that he wants to buy UK mobile phone operator O2, although he faces competition from Rupert Murdoch-controlled Sky.

That news swamped another announcement – that Li has also bought Eversholt Rail, which leases trains to the UK’s rail operators, for £2.5bn. It follows the recent decision by Jaguar Land Rover, which is owned by India’s Tata family, to build their new SUVs in the UK, creating 1,500 jobs. Brazil’s Safra family recently bought the Gherkin, an iconic London skyscraper. Others are snapping up cheap Greek shipping assets.

While most people are wringing their hands over the start of quantitative easing in the Eurozone and the future of the single currency, the world’s big investors are piling into Europe. Assets are cheap, but the continent has lots going for it, including a relatively wealthy population, stable laws and institutions, and thriving capital markets. And with Chinese growth at its lowest for 25 years, Old Europe has rarely looked so attractive.

Other big family-owned groups have been hoovering up assets in Southern Europe for a few years now. Investment from Chinese private companies – which usually means family-controlled ones – accounted for just 4% of total Chinese M&A funds in 2011, but had grown to 30% by 2013, according to Deutsche Bank.

Fosun, a Chinese conglomerate controlled by Guo Guangchang, made a bid for Club Med and bought 80% of Caixa Seguros, Portugal’s biggest insurance company. Chinese firms have also bought stakes in Spanish companies such as family-controlled sherry-maker Osborne, and the NH hotels chain. Chinese investment in Italy totalled over $3bn in 2014.

Clever investors could do worse than follow their lead. However, they should be aware that investing far form home doesn’t necessarily make you popular. A Communist Party newspaper which used to regularly call Li Ka-Shing “superman” last week declared that he is now a “big tiger” – a term previously used for corrupt officials.

Up-and-coming Chinese business leaders should instead be inspired by Jack Ma of online shopping giant Alibaba and Lei Jun, founder of mobile phone firm Xiaomi, says the Party.

Maybe another reason that Europe appeals.