Posts in category Business and finance


Business and financeGulliver

El Al can no longer ask women to move seats on religious grounds

ONE of the more unsavoury airline practices has now been outlawed. In 2015 flight attendants on El Al, Israel’s national carrier, asked Renee Rabinowitz, an 81-year-old holocaust survivor, to move seats after she boarded her flight in New Jersey. An ultra-orthodox Jewish male passenger had objected to having to sit next to her. Haredim, it was explained, are forbidden from close contact with females who are not relatives.

Ms Rabinowitz is not alone. As this blog has reported on several occasions in recent years, haredi men flying El Al regularly refuse to take their seats next to female passengers. And El Al staff, if the men cannot be accommodated elsewhere on the plane, will sometimes ask the “offending” woman to vacate her seat.

At the time, Ms Rabinowitz Continue reading

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Business and financeGulliver

Etihad allows flyers to bid to keep adjacent seats empty

THERE are few things that airlines will not now put a price on. Even so, Etihad Airways has come up with an intriguing idea. The Abu Dhabi-based carrier is offering flyers the chance to bid to keep adjacent seats on a flight empty. Passengers can suggest the price they are willing to pay to block up to three berths, and the chance to stretch out a bit.

Anyone who regularly suffers the ignominy of economy-class flying knows that there is no finer feeling than discovering that a flight is half empty and that there is no need to sit cheek-by-jowl with fellow members of the hoi polloi. Most travellers can recount with glee a journey in which they found they had an entire row to themselves, could raise the armrests, and sleep soundly and horizontally for the duration of the flight. It is surely the only time that it is preferable to have a booked ticket in the middle column of seating. (A particularly pleasing Continue reading

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Business and financeGulliver

Qatar Airways wants a 10% stake in American Airlines

IT SEEMED, at first blush, to be a masterclass in how to bait a rival. For years, American Airlines, along with other big American carriers, has complained of “unfair” competition from Middle Eastern operators, which stand accused of taking state subsidies. On June 22nd one of those accused, Qatar Airways, said it planned to take an unsolicited 10% stake in the firm.

In a regulatory filing, it was revealed that Qatar, which reported a profit of $540m in 2016, wants to buy at least $808m of American’s shares. The move has not gone down well with some. Doug Parker, American’s boss, described it as “puzzling”. One airline union accused Qatar of “using enormous government subsidies to gain a greater foothold in US markets”. Adding “They’re coming after our routes, which means the jobs of our members are at stake.”

Politicking from America, in turn, has been making life tough for Qatar’s national carrier. This month Donald Trump backed the decision of several Gulf states to cut diplomatic ties with…Continue reading

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Business and financeButtonwood's notebook

Why the falling oil price isn’t hurting markets

INVESTORS could easily get confused about the impact of oil-price rises on the economy and markets. The story seemed to be clear: high prices bad, low prices good. The two great oil shocks in the 1970s were unambiguously bad for Western economies—ushering in stagflation and transferring spending power to the oil-producing countries. In turn, low oil prices in the late 1990s coincided with the dotcom boom.

But when oil fell in the second half of 2015, that was seen as a bearish sign for the global economy and markets. Now oil is falling again, with both Brent crude and West Texas intermediate dropping more than 20%. But the decline has barely made a dent in the upward march of the S&P 500 index.

The key to the differing market reaction is why the oil price is falling. Back in 2015, the fear was falling demand. Investors worried in particular that the Chinese economy was slowing. If that assumption had been right, demand for much more than oil would have suffered. The equity markets did not…Continue reading

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ApprovedBusinessBusiness and finance

Cisco adapts to the rise of cloud computing

WHEN John Chambers ran Cisco, the world’s biggest maker of networking gear, his hyperactivity nearly matched that of the high-speed switches and routers that made the firm’s fortune. He pushed Cisco into dozens of new businesses, from set-top boxes to virtual health care. He travelled the world preaching the virtues of connectivity. In interviews it was hard to get a word in edgeways. Conversations invariably ended on a restless question: “What should we do differently?”

Chuck Robbins, who succeeded Mr Chambers in July 2015, has two decades of experience selling Cisco gear and seems more comfortable talking about its core business than about diversifications. He avoids the limelight and comes across as almost shy. But he, too, is aware of the need to keep moving. “Networking is getting complex. We need intuitive networks that are secure and can learn and adapt.”

Different times require different bosses. Mr Chambers led Cisco to the top during the dotcom boom; in…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Klarna, a Swedish fintech unicorn, gets a full banking licence

BANKS moan incessantly about over- regulation. Yet their banking licences come with perks: in most places only licensed institutions can accept deposits and offer current accounts; within the EU, “passporting” means a bank licensed in one country may operate across the single market. So some European financial-technology (“fintech”) upstarts have started to seek banking licences. On June 19th, Klarna, a Swedish payments firm valued at $2.25bn, became the latest—and the largest so far—to get one.

European fintech firms have various reasons for seeking approval as a bank. Bunq, a Dutch firm and one of the first to get a licence, started out in payments, like Klarna, but expanded to deposit accounts. Some, like N26 in Germany or Atom Bank in Britain, sought to be full-service, online retail banks from the outset. Others, such as ClearBank, a new British clearing and settlement bank, want to offer services to other firms.

Of those focused on the retail market, Klarna…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Fund managers rarely outperform the market for long

THE big investment shift of recent years is from active to passive. Clients have been buying index funds, which passively track a benchmark like the S&P 500 index, and shunning fund managers who actively try to pick the best shares.

One reason for the shift is that passive managers charge lower fees than active funds. Many clients would be happy to pay more if that translated into better performance. However, it is very difficult for investors to select fund managers who can reliably beat their peers. Performance does not persist, as the latest data from S&P Dow Jones Indices show clearly.

Suppose you had picked one of the best-performing 25% of American equity mutual funds in the 12 months to March 2013. In the subsequent 12 months, to March 2014, only 25.6% of those funds stayed in the top quartile (see chart). That result is no better than chance. In the subsequent 12-month periods, this elite bunch is winnowed down to 4.1%, 0.5% and 0.3%—all figures that are worse than…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Investors snap up Argentina’s 100-year bonds

ONE hundred years ago, Argentina was not the country it is today. Thanks to a belle époque of lavish foreign investment, rapid inward migration and bountiful agricultural exports, its GDP per person in 1917 was comparable to that of Germany and France. Although the first world war brutally interrupted international trade and investment, the country profited from filling the bellies of soldiers on the front with tinned corned beef.

No one knows how Argentina may change over the next 100 years. But many investors seem willing to bet on one forecast: that its government will in 2117 repay $2.75bn-worth of dollar-denominated, 100-year bonds, sold to enthusiastic investors on June 19th.

Since Argentina has defaulted six times in the past 100 years, that belief seems brave. But instead of looking backwards, investors are looking from side to side, at the miserable yields on offer elsewhere. Argentina’s “century” bonds yield almost 8%. That…Continue reading

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ApprovedBusinessBusiness and finance

Amazon’s big, fresh deal

JEFF BEZOS does not like sitting still. In his annual letter to Amazon’s shareholders this year, he warned of “stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death.” Competitors are toiling to avoid the same fate but it is hard to keep up. On June 16th Amazon said it would pay $13.7bn for Whole Foods, an upscale grocer known for its organic produce. Lest be accused of sloth, four days later Amazon announced a new service to let shoppers try clothes at home, for no fee, then return those they don’t like.

The news that Amazon would make clothes shopping even easier is a blow to America’s apparel chains, many of which are already in the middle of that excruciating decline. Yet it was the Whole Foods deal, more than ten times bigger than any acquisition Amazon has made so far, that caused the bigger stir.

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ApprovedBusinessBusiness and finance

General Motors is getting smaller but more profitable

THE headquarters of General Motors (GM) tower over the other skyscrapers in Detroit’s city centre, a reminder that the carmaker still rules the American market. Yet GM’s domestic might increasingly contrasts with its position elsewhere in the world. Although most other carmakers see becoming ever bigger everywhere as the answer to the industry’s multiple challenges, GM is in retreat.

It, too, long vied with the world’s largest carmakers for the global crown. Along with Volkswagen, Toyota and Renault-Nissan, it made around 10m cars last year. Investors have been unimpressed. Although GM had record profits in 2015 and 2016 and has performed solidly this year, its share price has barely budged since its IPO of 2010, after the financial crisis had forced it into bankruptcy.

Such is the frustration that Greenlight Capital, a hedge fund with a 3.6% stake in GM, proposed splitting its shares into two classes—one keeping the current dividend and the other…Continue reading

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ApprovedBusinessBusiness and finance

The prospects for the world’s biggest IPO

THE proposed sale of 5% of Saudi Aramco is not just likely to be the biggest initial public offering (IPO) of all time. “It’s like Gibraltar selling the rock,” as one expert on Saudi Arabia’s oil policy puts it. The world’s biggest oil company keeps the House of Saud in power, bankrolled 60% of the national budget last year, and is a paragon of efficiency in an economy otherwise mired in bureaucracy.

The elevation on June 21st of Muhammad bin Salman, the 31-year-old architect of the IPO, to crown prince is likely to add more momentum to a sale planned for the second half of 2018. The news will further sideline domestic critics of the IPO, some of whom wonder whether it would be better to borrow the money than sell the family silver. But the success of the IPO is not guaranteed. The tendency of MBS, as the prince is known, to micromanage the listing runs counter to the spirit of openness and liberalisation that he says he wants for Saudi Arabia. That could backfire on the IPO…Continue reading

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ApprovedBusinessBusiness and finance

A trendy Asian lifestyle chain opens in North Korea

Shop till you pop

WHEN Miniso said in January that its stores would “bring the happiness of stress-free shopping to the Koreans”, you would be forgiven for thinking they were referring to emporium-loving Seoulites. In fact, the home-goods store, co-founded by a Chinese entrepreneur and a Japanese designer, was announcing that it would be taking its capitalist trinkets into (ostensibly socialist) North Korea. In a joint-venture deal with one of the country’s state-owned enterprises, it agreed to establish the first foreign-branded chain store in Pyongyang, the destitute country’s showcase capital.

The first Miniso store opened there in April, eight months after its first shop in South Korea began operating, and just before it launched in America. Its arrival is remarkable in a place where displays of branding are rare (the exception is a handful of billboards advertising a local car firm, Pyeonghwa Motors).

Miniso’s coup in the secretive…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The Federal Reserve risks truncating a recovery with room to run

WHEN it comes to inflation, the Federal Reserve sometimes resembles a child freshly emerged from an age-inappropriate horror film. To its members, runaway price increases seem to lurk in every oddly shaped shadow. On June 14th America’s central bank raised its benchmark interest rate for the third time in six months, even as inflation lingered below its 2% target, as it has for most of the past five years. Some critics reckon the Fed’s 2% inflation target is too constraining. Indeed, in recent comments on a letter from prominent economists calling for a higher target, Janet Yellen, the chairman, signalled openness to the idea. But the Fed’s problem is less its target than an unforgiving pessimism about American productivity. If its bleak view is wrong, the Fed itself is partly to blame for slow growth.

Economists generally treat productivity growth as a “real” factor, outside central-bank control. Thus, it is thought to depend on things such as technological progress, workers’ skill levels and the flexibility of the economy. But productivity growth is cyclical: it varies depending on whether an economy is booming or busting. Central banks might therefore have more influence over it than they are prepared to admit.

Economies have a growth speed limit, determined by changes in population and productivity. When unemployment is high, the economy…Continue reading

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ApprovedBusinessBusiness and finance

A hybrid startup offers AI services to business

Bengio, neutral agent?

BOSSES are more likely to groan than feel giddy about advances in artificial intelligence (AI). They need a strategy, but few companies can hope to own a unit like Google’s DeepMind, whose algorithms not only beat the world’s best Go players but made a 40% improvement in the energy efficiency of its parent’s data centres. A Canadian startup, Element AI, wants to let all businesses tap into the world’s best AI minds.

The brain behind the new firm is Yoshua Bengio, a pioneer in “deep learning”, a branch of AI. As firms such as Google and Facebook lured dozens of AI academics, some in the field expressed fears about a brain drain from academia. In 2015, for example, Uber, a ride-hailing startup, poached 40 researchers from Carnegie Mellon University. Mr Bengio meanwhile stayed at the University of Montreal (though in January he became an adviser to Microsoft).

Element AI will let researchers stay in their university…Continue reading

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ApprovedBusinessBusiness and finance

Travis Kalanick steps down as chief executive of Uber

Scoot

“WE HAVE a lot of attention as it is. I don’t even know how we could get more,” Travis Kalanick, the boss of Uber, said last year. The ride-hailing giant found a way. Mr Kalanick failed to manage the fallout from a series of high-profile blunders and scandals. On June 20th he resigned as chief executive officer of the firm he co-founded in 2009.

Uber is facing several crises, including senior executive departures, a lawsuit over alleged intellectual-property theft, claims about sexual harassment and a federal probe into its use of potentially illegal software to track regulators. Mr Kalanick had previously said he would take a leave of absence, in part to deal with a personal tragedy—the death of his mother in a boating accident. That was not enough for investors in Uber, who asked him to make his leave permanent.

Uber will not change overnight. Mr Kalanick trained it to be unrelentingly competitive, aggressive and ready to break…Continue reading

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ApprovedBusinessBusiness and finance

India’s huge buffalo-meat industry is in limbo

IN A corner of the state of Uttar Pradesh (UP) stands a gleaming building dedicated to animal slaughter on an industrial scale. Neatly mown lawns lead the way to a corral for hundreds of the curly-horned Murrah buffalo typical of the region. Nearby is a lorry-sized, stainless-steel machine in which the animals are killed. A Muslim cleric stands ready to oversee the incantation that ensures each carcass will be halal. Upstairs a microbiology lab monitors the progress of each beast through stages of chilling, deboning and deglanding. Each pile of disaggregated buffalo is then frozen solid and put into a loading chamber.

Such facilities are common in UP, although they do not advertise their whereabouts for fear of antagonising “cow vigilantes”, Hindu militants who harass and extort in the name of protecting cows, which a majority of Indians hold to be sacred. India earns around $4bn a year from exporting beef, and last year was the world’s biggest exporter of the product….Continue reading

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ApprovedBusiness and financeFinance and economics

Finland tests an unconditional basic income

JUHA JARVINEN, an unemployed young father in a village near Jurva, western Finland, brims with ideas for earning a living. “I’m an artist and entrepreneur. Sometimes I’m too active, I don’t have time to stop,” he says. He just agreed to paint the roofs of two neighbours’ houses. His old business, making decorative window frames, went bust a few years ago. Having paid off debts, he recently registered another, to produce videos for clients.

Mr Jarvinen says that for six years he had wanted to start a new business but it had proved impossible. The family got by on his wife’s wages as a nurse, plus unemployment and child benefits. Mr Jarvinen had a few job offers in the main local industries—forestry, furniture-making and metalwork. But taking on anything short of a permanent, well-paid post made no sense, since it would jeopardise his (generous) welfare payments. To re-enroll for benefits later, if needed, would be painfully slow. “It is crazy, so no one will…Continue reading

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Business and financeGulliver

“Basic economy” class is winning over flyers

GULLIVER wrote last week about American Airlines handing indignant flyers a notable victory. The carrier rescinded a plan to take away an inch of legroom from economy-class seats on new planes, following a public outcry. Such concessions are rare. Airlines generally worry about how customers vote with their wallets not how they grumble with their words. Hence, they cut comforts to offer the low fares that people demand.

Anyone hoping that American Airlines’ climbdown might signal a reversal of that trend should think again. Earlier this year, United Airlines introduced a new class of fare, “basic economy”. Such tickets, which strip out those few remaining comforts that economy passengers enjoy, have been derided as “last class”. But, like it or not, cost-conscious passengers are showing their approval.

The airline expanded the programme to all domestic markets last month. Andrew Levy, United’s CFO, said last week that about…Continue reading

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Business and financeGulliver

Complaints against America’s airlines are rising

LAST year, Bob Fornaro, the boss of Spirit Airlines, talked of the effort his firm had made to reduce the number of customer complaints. The ultra-low-cost carrier, dubbed the most hated airline in America by Bloomberg, had long been ranked as a primary purveyor of passenger pain, regularly propping up lists that rate airline service. Alas, Mr Fornaro’s efforts seem to have gone unrewarded. Complaints per passenger remain easily the highest of any of the big American operators. In fact, as our chart shows, things seem to be getting worse.

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ApprovedBusinessBusiness and finance

An industry shudders as Amazon buys Whole Foods for $13.7bn

AMAZON announced on June 16th that it would pay $13.7bn to buy Whole Foods, a grocer known for its organic produce. On the face of it, the purchase might not seem to upset the grocery cart, either for Amazon or for the supermarket business. Amazon controls a measly 0.2% of America’s grocery market; Whole Foods has just 1.2%, according to GlobalData, a research firm and consultancy. By Chinese standards, Amazon looks slow: Alibaba, another e-commerce titan, bought a 32% stake in a Chinese grocer last year.

Nor is Whole Foods a juggernaut. It has about 450 stores in America, Britain and Canada, but American shoppers are now buying a wide range of organic foods at other grocers, without having to put up with Whole Foods’s steep prices or its hipster clientele.

Nevertheless, the deal marks a new era for Amazon. It has run a few experiments in physical retail, including bookstores in Chicago and in New York. In Seattle it is testing a small grocer, Amazon Go, where…Continue reading

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ApprovedBusinessBusiness and finance

Canadian banks don’t face a crisis. They do face a strategic trilemma

AS the global financial system was engulfed in crisis in 2008-10, only one set of banks in Europe and North America stayed serene and safe: Canada’s big five lenders. They were largely untouched by the madness south of the border and across the pond and kept churning out profits. After the crisis experts went on pilgrimages to Toronto and Ottawa to study the Canadian way. The country’s central-bank governor, Mark Carney, became a financial celebrity who was headhunted to run the Bank of England.

Canada’s banks quickly joined the select ranks of the industry’s superpowers, shooting up the global league tables in the aftermath of the crisis. Today three of them are on the list of the 20 biggest banks globally, measured by market value: Royal Bank of Canada (RBC), Scotia and Toronto Dominion (TD). RBC is worth more than Spain’s Santander, the euro zone’s biggest bank.

It has taken nearly a decade but Canadian lenders are back in the spotlight, this time accused of…Continue reading

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ApprovedBusinessBusiness and finance

Corporate Europe is giddy with optimism

IT IS remarkable what a difference a single election can make. “The way Europe is regarded by the rest of the world has changed in a few months,” says Gérard Mestrallet, chairman of both Engie and SUEZ, two big French energy firms, and a board member at Siemens of Germany, the region’s biggest engineering firm. The arrival of Emmanuel Macron as France’s reform-minded new president—his party is set for a giant victory in parliamentary elections this week—is helping to transform attitudes from gloom to cheer.

Mr Mestrallet echoes many corporate leaders in describing “real hope and enthusiasm”, amid expectations that the new president will, within months, “de-block” the euro zone’s second-largest economy. Mr Macron will start freeing business activities, he says, first with legislative reform of a rigid labour market to simplify rules on hiring and firing, and then by cutting tax rates (the corporate kind will fall from 34.4% to 25%). Measures to boost entrepreneurship…Continue reading

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ApprovedBusinessBusiness and finance

German deep discounters go big in America

Rummage sale

AMERICA’S economy is enjoying its third-longest period of uninterrupted expansion since the 1850s. So it is at first glance puzzling that Lidl, a German deep-discount chain whose sales soar when times are hard, is entering the market now. On June 15th Lidl opened nine stores in Virginia, North Carolina and South Carolina. Up to 90 more stores across the country are to follow within a year.

The move may be far-sighted, however. Lidl’s arch-rival, fellow-German discounter, Aldi, has been in America for four decades and has 1,600 stores across 35 states. It has had success not just among poor Americans but, increasingly, among the middle class, according to Bain, a consultancy. Aldi is preparing for an expansion: on June 12th it said it would add 900 more in the next five years, putting it third in the country by store count, behind Kroger and Walmart, America’s biggest retailer.

Unlike conventional supermarkets, which usually carry…Continue reading

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ApprovedBusinessBusiness and finance

American energy firms are enjoying a bonanza south of the border

Supply chain in action

A CHEMICAL engineer at Pemex, Mexico’s state-owned oil company, opens a tap atop a maritime platform in this offshore oilfield in the southern part of the Gulf of Mexico. She decants a jar of heavy Mexican crude that comes, hot to the touch, from 3,500 metres below the seabed. It looks like a succulent chocolate sauce, but smells like the back end of a cow. “Taste it,” she laughs.

The crude that she is testing is pumped a short distance across the sea to a vast floating storage tank, known as an FPSO, where it is blended with lighter crude for export. The FPSO stores about 2m barrels—roughly the equivalent of a day’s worth of Mexican oil production. A quarter of that is fed into a supertanker tied alongside, contracted by Chevron, America’s second-largest oil firm. It then sails north across the maritime border to Texas or Louisiana where the crude runs through refineries. The refined petrol or diesel often then returns to…Continue reading

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ApprovedBusinessBusiness and finance

One year before the World Cup, FIFA is shunned by sponsors

AT THE World Football Museum in Zurich, run by FIFA, football’s global governing body, visitors take their photo with the World Cup trophy, try their hand at match commentary and gawk at artefacts ranging from the original handwritten set of the rules of the game to the yellow card famously shown to Paul Gascoigne, a lachrymose English footballer, in 1990. Those wanting a glimpse of the luxurious bedsheets that were used to shield FIFA officials as they were hustled out of a ritzy Swiss hotel in 2015 having been arrested on corruption charges may feel cheated—they are not on display.

If FIFA’s shrine to itself ignores this squalid period of its history, its balance-sheet bears the traces. FIFA lost $369m in 2016, triple the losses of the year before, and forecasts a loss of $489m in 2017. Reserves, which have been above $1bn since 2008, are predicted to fall to $605m next year.

The latest loss is partly because of higher development funding for member…Continue reading

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ApprovedBusinessBusiness and finance

A high-flying Chinese dealmaker has his wings clipped

“THE total number of airline miles travelled by this team is equal to a round trip between Earth and the moon.” So bragged Wu Xiaohui at a recruiting event held at Harvard University in January 2015. The boss of Anbang, a big Chinese insurer, was dazzling potential hires with his plans to go global. Anbang had shot to prominence just weeks before with a deal worth $2bn to acquire the Waldorf Astoria hotel in New York from America’s Hilton.

Since then Mr Wu has attempted acquisitions around the world worth a total of some $38bn (see table). Political controversies have caused a number to unravel. One that recently fell apart was Anbang’s negotiation to take a $400m stake in a property in Manhattan, 666 5th Avenue, controlled by a firm owned by the family of Jared Kushner, President Donald Trump’s son-in-law. There were complaints about a potential conflict of interest on the part of Mr Kushner, who advises Mr Trump on relations with China.

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ApprovedBusiness and financeFINANCEFinance and economics

Inflation has not yet followed lower unemployment in America

THAT central banks cannot endlessly reduce unemployment without sparking inflation is economic gospel. It follows from “a substantial body of theory, informed by considerable historical evidence”, according to Janet Yellen, chair of the Federal Reserve. Her conviction explains why, on June 14th, the Fed raised interest rates by a quarter of a percentage point, to a range of 1-1.25%.

Excluding food and energy, prices are only 1.5% higher than a year ago; the Fed’s inflation target is 2%. But Ms Yellen thinks unemployment is below its so-called “natural” rate, so inflation should soon rise. Is she right? Or has the relationship between unemployment and inflation, dubbed the Phillips curve, gone missing?

It is not the first time the theory has failed. After the financial crisis unemployment soared to 10%. This surfeit of workers should have sent inflation tumbling. But prices held up well; in October 2009, when unemployment peaked, underlying inflation was 1.3%, only a little…Continue reading

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Tanzania’s firebrand leader takes on its largest gold miner

“IF THEY accept that they stole from us and seek forgiveness in front of God and the angels and all Tanzanians and enter into negotiations, we are ready to do business.” As conciliatory gestures go, that one by John Magufuli, Tanzania’s president, to Acacia Mining, the country’s largest foreign investor, could hardly have been more fork-tongued.

Nonetheless, two days later John Thornton, head of Barrick Gold, Acacia’s largest shareholder, met Mr Magufuli to start talks on ending a dispute that has halved Acacia’s market value since the government in March imposed a ban on the export of gold- and copper-concentrates. It is a mark of the seriousness of the stand-off that he is ready to negotiate on all points of contention between the two sides.

The context of the row is increasingly typical of Africa’s mining industry. The Tanzanian government is seeking more tax revenue from a foreign mining firm that was initially wooed into the country by generous tax…Continue reading

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A Swedish activist speaks softly and carries a big stick

Gardell, smiling butcher

“SCLEROTIC companies abound in Europe,” says Christer Gardell, co-founder and managing partner of Cevian Capital, an activist hedge fund based in Sweden. That is an uncommonly pugnacious statement for a firm that operates behind the scenes and uses public pressure as a last resort. Unlike its louder American peers, such as Bill Ackman’s Pershing Square, Paul Singer’s Elliott Management or Dan Loeb’s Third Point, Cevian has never written a pointed open letter to a chief executive or waged a proxy battle (although Carl Icahn, an activist who has been known to call bosses “morons”, is one of its investors).

Its calm approach seems to suit corporate Europe. Cevian is the region’s largest activist fund, and one of the world’s biggest, with over $15.4bn in assets. It was founded by Mr Gardell and Lars Forberg in Stockholm in 2002; both still run it. Its “constructive” activism, focusing on only a dozen companies at a…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Death pools can bring financial security for the long-lived

Thinking inside the box

WHEN members of a private club in Manhattan suddenly start dropping dead at an alarming rate, Matt Scudder, a private detective, suspects more might be at play than bad luck to explain the bizarre series of suicides and violent accidents. If this sounds like the back-flap of a murder mystery, your deduction skills are as sharp as Mr Scudder’s. In Lawrence Block’s “A Long Line of Dead Men,” the cunning detective eventually uncovers the motive for the killing spree: the club of 31 men were all part of a tontine.

These ancient financial instruments are built on members paying money into a pool, which is invested and then pays out dividends once they reach a pre-agreed age. Those who live longest will see their income increase as others die; the last one standing receives the most. They are essentially a form of insurance against an unexpectedly long life.

Although most people will know them from the works of Agatha…Continue reading

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