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Rothschild & Atticus Capital | Investors and History

Rothschild & Atticus Capital

Rothschild & Atticus Capital | Article

Here is an article from TimesOnline on Rothschild and Atticus.

A contemporary at Oxford remembers Nathaniel – “Nat” – Rothschild as the runt of the Bullingdon litter. Rich? Yes. Clever? That goes without saying. But dishevelled, disorganised, spotty; the privileged possessor of a blue Por-sche but no clear idea of where he was going.

Something about Rothschild struck an odd note. He was bright but impetuous. He adopted the hard-drinking, hard-partying ethos of the notorious dining club as a way of life. Members such as George Osborne knew how to play the game. Though quite the poseur, as the picture of the 1992 Bullingdon boys attests, Osborne was studious and focused, his sharp mind and will already tuning themselves for Westminster.

Yet the two were friends and remained so – until last week. In the years after they left university, Rothschild, the wanton wild child, defied expectations. A brief, unhappy marriage seemed to bring him up short. He discovered the value of hard work – and that he had the family talent for making money.

By the time he and Osborne, now shadow chancellor, met on holiday this summer in Corfu, Rothschild was on a roll, appearing in The Sunday Times Rich List as Britain’s top hedge fund manager; with a family fortune of £1.4 billion, he was tipped to become the richest Rothschild of his generation.

Like his forebears, Rothschild enjoyed the company of politicians and invited Osborne and his family to visit him at his father’s villa, hidden away among the olive groves, with its marble pool, artificial waterfalls and “one of the most spectacular marine views in the world”. Perhaps it gave them all the opportunity to savour the Queen K, the £80m yacht belonging to Rothschild’s super-rich Russian business associate Oleg Deripaska, which was moored off the island. When space at the villa ran out, another of Rothschild’s guests, Peter Mandelson, now the business secretary but then still the EU trade commissioner, was billeted on board.

What was discussed between the various parties is now the subject of an explosive bust-up ignited by The Sunday Times. On his return to Westminster, Osborne gossiped about Mandelson, intimating that he had spoken “pure poison” about Gordon Brown during dinner at a local taverna. Details of the summer party started to leak, and suddenly the newspapers were crawling all over the links between Mandelson, Rothschild and the oligarch.

Rarely in Westminster has revenge been so swift or so devastating: last Monday Rothschild wrote to The Times accusing Osborne and Andrew Feldman, the Tories’ fundraiser, of trying to solicit a donation to the Conservative party from Deripaska and even of suggesting how it might be channelled through a British subsidiary company to make it legal.

Osborne and Feldman hotly deny having solicited – or accepted – any such donation, but a nasty crack has opened up across the path leading to 11 Downing Street. Rothschild must have known what he was doing when he put his name to the letter at his home in the Swiss ski resort of Klosters and pressed Send – or if he didn’t, he had highly paid advisers who did.

Osborne was lucky to have the unequivocal backing of David Cameron, but other senior Tories were happy to call him a ‘prat’. The big and still unanswered question is what made Rothschild do it – was it a return of that wild streak? Why would he stab an old friend so ruthlessly in the back?

The lack of answers suggests that those are the wrong questions. Instead of wondering why Rothschild would injure an old friend, perhaps we should wonder why he would go to such lengths to protect a newer one. Not Peter Mandelson, interestingly – though Rothschild pointed out that “it ill behoves all political parties . . . to make capital at the expense of another in such circumstances” – but Deripaska.

Rothschild’s intervention has deflected attention from the oligarch, his fortune and his links to Mandelson and set the spotlight squarely on Osborne, which was perhaps Rothschild’s plan. The financier has staked his all on making it in Russia, where his ambition to become the richest Rothschild has long seemed more easily achievable than it would be elsewhere.

Now the credit crunch means associates such as Deripaska face trouble – he has until next weekend to find $4.5 billion to cover loans from western banks used to buy a 25% stake in a Russian nickel company. What happens to Deripaska has grave implications for Rothschild, whose hedge fund, Atticus, is also in deep water.

Nat Rothschild is an intriguing character, embodying both his family’s financial flair and its tendency toward excess, a combination that has occasionally ended in tragedy. In 1996, just as Nat was joining his hedge fund, his uncle Amschel, tipped for the top of the family bank in London, hanged himself, aged 41. Four years later another cousin, Raphael de Rothschild, died in New York of a heroin overdose. He was even younger – 23.

At Eton, Rothschild, now 37, was so unruly that at one point he was billeted with a housemaster to calm him down. A fellow pupil describes him as “a rather scruffy and unpredictable boy with a rebellious streak who you would never have tipped to make a big success of his life. He seemed the classic example of a boy born into privilege, weighed down with parental expectations, but who resisted any type of conformism and resented authority”.

History, though, and with it expectation, must have weighed heavy on his shoulders. Nathan Mayer Rothschild, founder of the private bank NM Rothschild, which is still in existence, arrived in Manchester in 1798, one of five brothers sent around Europe by a father ambitious to make their fortunes. By the time of Waterloo, Nathan had become the world’s most powerful banker, handling the shipment of bullion to the Duke of Wellington’s army in Portugal and Spain, earning commission on the transactions.

The name Rothschild became synonymous with wealth. In the Hebrew version of the song If I Were a Rich Man, the title is ’lu ha’yiti Rothschild (If I Were a Rothschild). In France, “le goût Rothschild” still denotes a glamorous style of living characterised by extravagant use of velvet and gilding.

By the time of Queen Victoria’s reign, the Rothschilds were famous for their race-horses, grand houses and art collection. Disraeli, the prime minister, said that if he ever needed to know a historical fact he consulted his clever friend “Natty” Rothschild. Natty’s great-grandson Jacob, the current Lord Rothschild and Nat’s father, is said to be like his Victorian ancestor: entrepreneurial, brilliant, mercurial, restless and opinionated.

The Rothschilds have a tradition of courting – and being courted by – politicians. Nat’s great-great-great-grandfather Lionel became the first Jewish MP, though it was not until 11 years after he was first elected in 1847 that he could take his seat in the House of Commons; Lord Rosebery, the Victorian prime minister, married a Rothschild; the Balfour declaration setting terms for an independent Palestine was actually a letter to Lord Rothschild from Balfour, when foreign secretary.

During the last Conservative administration, when NM Rothschild was privatising companies such as British Gas, the bank had to defend its employment of cabinet ministers such as Lord Wakeham, John Redwood and Norman Lamont.

What a lot for Nat to live up to. He dutifully showed some business nous. At 12 he was taken to visit his first investment firm and at 13 he wrote to David Landau, the founder of Loot, the classified advertising paper, to offer him ideas. But behind the entrepreneurial spirit was an irresistible urge to go off the rails.

At Oxford, where he read history at Wadham College, he was a “linchpin” of the party scene. His Bullingdon club contemporaries included not just George Osborne, but Chris Coleridge, brother of Nicholas Coleridge, the boss of Condé Nast publishers, and Mark Petre, son of the 18th Baron Petre. Mark was found dead at his family’s stately home in Essex in 2004 while awaiting trial for driving under the influence of drugs.

How friendly Rothschild and Osborne really were is a matter of speculation. Rothschild seems to have cherished a sneaking contempt for the shadow chancellor. When they were at prep school together, he remembered Osborne saying: “If I’m going to be prime minister, I no longer want to be known as Gideon [his original name]. I want to be known as George.” Rothschild has said that if he had to name three male friends, Peter Mandelson woud be one of them.

On one occasion at Oxford, Rothschild is said to have jumped onto a table and shouted: “Ninety-seven million!” – which some took to be a reference to the size of his trust fund. A Bullingdon breakfast, or “brekker”, ended with Rothschild and his Buller friends sending a portable lavatory rolling down a hill – with one of their number, Harry Mount, inside.

During the summer of 1992, Rothschild attended parties thrown by the Piers Gaves-ton society (named after the gay lover of Edward II), which required guests to dress up in drag, and the Assassins, another university drinking club.

That same year, Rothschild repeatedly found himself in trouble with the law. He was fined £2,000 and received a 12-month driving ban after failing a roadside breath test and refusing to take a further test at a police station. His lawyers told magistrates that Rothschild was suffering from “severe depression”. The case came after two separate incidents that led to him being fined for careless driving and driving without an MoT certificate.

The banking heir’s wanton behaviour did not stop there. Natalie Rowe, a former prostitute, claimed that in 1994 she was asked to supply drugs and strippers for a party held at Waddesdon Manor, the Rothschilds’ country seat. The request, she alleged, came from Nat.

“They were very precise in what they wanted – three slim black girls in stockings, suspenders and high heels,” Rowe told a tabloid newspaper. “They also wanted the girls to do extras . . . But there was a dispute over money after one of the guests had sex with one of the girls. I was told he would only pay £100 – the cost was £350. It ended up with one of the girls calling the police because the men were rocking her car as she sat in it. She told me the police treated it all lightly and didn’t really ask any questions. They just told the guys to let her leave and that was it.”

At Oxford, Rothschild was also one of three founders of a student newspaper called Rumpus, which was sold at news-agents for 30p. Its first edition featured a topless girl, a “page 7 fella” and instructions on how to steal a car. A picture of Osborne, dressed as a wizard, appeared on the newspaper’s astrology page.

The university and student union described the publication as “childish” and “thoroughly scurrilous”, but Rothschild made no apologies. “No one had gone off the beaten track before. We wanted to disprove the theory that you can’t sell an Oxford newspaper,” he said.

What brought about his Damascene conversion from hellraiser to sober financier – he now drinks nothing stronger than Diet Coke – remains a mystery. After Oxford, he graduated to the London party circuit, then ran away to Las Vegas in 1995 to marry the model and socialite Anna-belle Neilson, whom he had met on a beach in India.

They moved to New York, where Rothschild joined Gleacher Partners, the financiers. Eric Gleacher, its chairman and a friend of Jacob Rothschild, gave the young heir the break he craved. “When I first saw Nat [with his father], he looked down in the dumps,” Gleacher said. “He had enormous boots to fill, and I think getting out of London and coming to New York, where he was really on his own [was what he needed]. When a young person finally gets away from home, doing whatever they do, that’s when they either blossom or not. And he blossomed. Coursing through his veins are centuries of financial acumen. It’s in his DNA.”

While he was working at Gleachers he met Timothy Barakett, a Canadian who was trying to set up Atticus Capital, a new hedge fund. Rothschild, whose hasty marriage quickly broke down, became a partner and used his contacts to attract investors. He set his sights on making a fortune without help from the family – beating the Rothschilds at their own game. “He has absolutely aimed at becoming super-successful,” said Peter Munk, an early investor in Atticus who now jointly invests with Rothschild in central Europe and the Balkans. “He felt that the family lost the total predominance as financiers that they had in the last century to the Morgan Stanleys and Goldman Sachses. There’s . . . a flame in there that makes him determined to reestablish that absolute predominance. It goes much beyond making a buck.”

Accounts of Rothschild’s effectiveness as a fund manager are mixed. While Atticus undoubtedly became a roaring success, much of that was due to Barakett. A rival fund manager dismissed Rothschild as “a marketing guy”, saying: “He brings the Rothschild name and stamp of authenticity to the organisation. He is a smart guy but he’s not calling the shots on the investment side.

“I met him once,” he continued, “and let’s say he is just a little arrogant – but wouldn’t you be if you were him? He has the 160ft yacht off Harbour Island, the helicopters buzzing overhead and the social life.”

Atticus, however, was not enough for Rothschild, who had still greater financial ambitions. Having already befriended Roman Abramovich, the billionaire who would later buy Chelsea football club, Rothschild is believed to have first met Oleg Deripaska, the Russian aluminium tycoon, in the rarefied surroundings of the five-star Le Meurice hotel in Paris in April 2002.

The two men were in town to attend an international board meeting of Brasilinvest, a £500m Sao Paulo-based investment company with interests in finance, property and telecommunications. Keynote speakers at the event were President George Bush Sr and Helmut Schmidt, the former German chancellor. Deripaska had already served on the board of Brasilinvest for some time, while Rothschild had just been invited to join the board for a three-year term by the wealthy Garnero family from Brazil.

“During the board meeting Nat was introduced to Oleg, and together they became good friends in their own right,” said Mario Garnero Sr, chairman of Brasilinvest. “But I didn’t really follow their next steps.”

It wasn’t long, though, before Rothschild became a close business adviser to Deripaska. In February 2003, according to records filed at Companies House, Rothschild set up JNR, a company dedicated to finding investment opportunities in eastern Europe and the former Soviet republics. Deripaska was JNR’s most important contact.

Nat reportedly introduced his father to Abramovich. Relations between Rothschild père and fils are hard to fathom. Friends say Jacob and Nat each “do their own thing”, suggesting they are not particularly close. Nat’s father, a firm believer in the Rothschild way of wielding influence quietly, behind the scenes, is said to have disapproved of his writing of the intemperate letter to The Times, and maybe it is with a view to winning his approval that Nat has thrown himself into making money and declared his intention, next time, to marry “a nice Jewish girl”.

Abramovich made his fortune from investing during the 1990s in Russia’s privatised aluminium plants, like Deripaska, and in the Sibneft oil company. Five years ago Sibneft merged with Yukos, another Russian oil business, which had been built up by Mikhail Khodorkovsky, a long-term friend of Jacob Rothschild.

Khodorkovsky and Lord Rothschild are trustees of the Open Russia Foundation, a charitable wing of Yukos founded to promote Russian arts in the west. Henry Kissinger, the former US secretary of state, is also a trustee. Lord Rothschild, a director of the state Hermitage museum in St Peters-burg, was responsible for the opening of the Hermitage Rooms in London’s restored Somerset House as a venue for displaying Russian works.

The suite includes a Khodorkovsky Room, but it is now closed and Khodorkovsky – himself once the richest man in Russia – is in jail, convicted of fraud and tax evasion, with Yukos’s assets having been seized and sold. Jacob Rothschild has ceased to have any financial involvement in Russia.

By contrast, his son is in deeper than ever: he acts as a financial adviser to Deripaska and they are co-investors in a marina in Montenegro, intended to create a “new Monaco” in eastern Europe. Rothschild won credibility in Russia with the huge success of Atticus. In the period from 2003 to 2006 particularly, investors who had lost in the tech crash switched to the new hedge funds that never seemed to lose money. Not everyone around Rothschild was keen on his Russian connections, though. One associate was said to feel “uneasy”. He felt that unless you knew your way round the Kremlin, you didn’t really know who you were dealing with.

Rothschild apparently saw his role as “trying to guide Deripaska on how to deal with the West”. An acquaintance remembers Rothschild being quite protective of the Russian. They were about the same age and became good friends. The general impression, though, was that Rothschild was “running alongside” Deripaska – who seemed to “find him useful to build his credibility. Nat could introduce him to people he could never reach”.

The relationship was obviously close enough for them to feel comfortable entertaining each other’s friends this summer, but as the new chums were clinking their glasses of champagne, or ouzo, in the sunshine, the threatening financial clouds were gathering.

Atticus didn’t fall into the classic hedge fund trap of taking in money that could be withdrawn after three months – in which a hedge fund makes itself out to be a sort of bank delivering super-returns – the reason many hedge funds are now folding. They are facing runs – just like banks, but without a central bank to protect the depositors.

Instead, Atticus tends to have investors who lock up their funds for longer periods. Performance, however, has been poor this year, down 43% on the European fund, with Atticus Global down 27.2%. Atticus is now worth $11 billion, just over half its value at its peak. Hedge fund managers such as Barakett have been visiting investors in recent weeks to try to persuade them to leave their money where it is. In some cases they offer hefty discounts on management and performance fees in return.

Many suspect Deripaska has money tied up in Atticus, though Rothschild’s advisers have denied this in the strongest terms. Certainly the Russian financial colossus is also in trouble. Forbes magazine estimates that Deripaska has lost at least £8 billion over the past six months. The oligarch borrowed extensively in recent years to fund the global expansion of his aluminium, construction and car-parts empire and he is now being hit hard by both the credit squeeze and a 70% fall in Russian stocks.

Both Deripaska and Rothschild are under intense pressure. That pressure may well have created a bond that explains why, when faced with unwelcome intrusion into their private world, Rothschild felt the need to lash out. Source

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