*
Barton managed INI’s Europe Fund composed of different portfolios specialised in different property strategies. From an initial investment of a few million pounds its capital had grown two billion over the course of five years with assets under management exceeding five billion. The property fund had gone from strength to strength, over the remarkably propitious 2010-2014 period, returning over forty percent in five years, charging sky-high fees with an annual two percent on capital plus twenty five percent on profits. As fund manager Barton’s profit related earnings rocketed as property returned extraordinarily high gains in the world’s most global of global cities.
The fund, domiciled offshore in the Cayman Islands, as were sixty percent of other such funds, escaped control of the financial regulatory authorities and of course the inland revenue. As such it was one of the many funds that controlled a total of more than three trillion dollars in assets world wide, though its management unit, based in the UK, was subjected to regulatory controls.
The majority of the shares were owned by Barton and other individuals, including Michael Fitzwilliams, Pat Kennedy and Sergei Tarasov, the remainder by other high wealth individual investors and funds.
The risks were relatively low; mostly related to economic and property cycles, on the other hand it was not a simple matter if a shareholder or shareholders wanted for some reason to withdraw their capital, since properties owned by the fund could not be easily disposed of, unlike shares that could be bought or sold at the press of a button. To prevent being forced into a property fire sale, a gate prevented shareholders from pulling out at short notice, suspending redemptions and forcing funds shareholders to wait for properties to be disposed of in an orderly manner.
Each property was acquired by a company specifically set up by the fund for that purpose. The company received income from rents paid, which were distributed as income, and growth that came from increases in value of the properties. The fund avoided the problematic of managing the day to day functioning of properties by subcontracting this task to specialised firms.
Liam Clancy’s role was that of managing residential sector investments, that is to say units in prime property developments in London and other selected sites.
Almost all investments in Barton’s portfolio were speculative, short term, designed to capitalise on the rise of super prime property prices, which he did not see falling in view of the volatility and the volume of hot money seeking a shelter.
The fact was, Barton, as the general manager of the fund, a private investment vehicle, could do as he wished providing he informed the investors in advance of his strategy.
Tom had learnt from his long experience in property that the cycles repeated themselves, never in exactly the same fashion, but rising and falling with almost clockwork regularity. In the long term prices always rose, a simple glance at prices over the past one and a half to two centuries showed a relentless climb. There were many reasons: at the time of the Battle of Waterloo the population of the British Isles stood at five or six million, two centuries later it had increased more than ten fold and continued to grow.
However, there were short term cycles with sharp rises and falls, linked to punctual economic conditions and events. And as always homes were never built fast enough, it was not in the interest of industry to create oversupply, the same went for most other sectors of public and commercial properties. The only exception to this rule was industry, which was built for future production and future profits.
Tom Barton did not believe in end of the world crashes, on the other hand, he knew an imprudent investor could be wiped out in a flash, as had happened in 2007 to the Northern Rock and the West Mercian Finance in 2008.1
His strategy had always been to monitor the market closely, which was a full time, stressful, task and the principal reason why he had contemplated quitting the rat race, or at least search for a more satisfying life.
In the years he had got to know Fitzwilliams and his close entourage he developed solid friendships with Pat Kennedy, Sergei Tarasov, John Francis and of course Steve Howard who had pulled him out of his Bangkok impasse.
Seven years had passed since that fateful day at the end 2007, when he boarded a flight for Dubai on a voyage that was to last seven years. During which time his view of the world at large had not changed, but he had learnt to see his own life more objectively.
1. West Mercian crash see Death of a Financier written by the author published in 2009
A SCAPEGOAT
Barton reservations about the origin of certain monies invested in the Europa Property Fund continued to worry him. The fund, based in the Cayman Islands, held a variety of properties in its portfolio, most of which were registered to a cascade of offshore companies.
The Europa fund’s earnings grew as the flow of investment capital from Russia surged with the Ukrainian confrontation and Putin’s annexation of the Crimea. Then as China’s property market cooled and a crackdown on corruption sent rich Chinese in search of a shelter, the flow continued, as investors scrambled to put their wealth beyond the reach of their authorities.
It was certain that a good proportion of the funds was derived from graft, corruption and tax evasion, making Europa a possible accomplice in the eyes of the UK National Crime Agency, which had voiced its reservations about the origin of money flowing in from Russia, China and other countries.
Barton’s greatest nightmare came in the form of the US Federal authorities, which had nailed HSBC for similar affairs. At moments he imagined himself in an orange jumpsuit, like a felon, behind the bars of a Federal prison after being extradited to the US by a complaisant British government.
The City had become a key platform in a system of money laundering through the purchase of prime London property. Assets were sequestered through a series of offshore shell companies registered as legal owners, a process that led to price inflation, stimulating speculative investment and construction. All of which was indirectly encouraged by government as a growth factor and source of tax revenues, inevitably leading to a distortion in the property market and the flight of working and middle-class Brits from their traditional boroughs in London.
Barton had observed the development of media instigated witch hunts; the investigation of historic crime had started with accusations of sexual abuse, then war crime in Northern Ireland, followed by the wars in Iraq and Afghanistan. With whistle blowers were digging for dirt they were certain to find it and Barton had no intention of hanging around waiting for the finger to point at him.
He would be a ready-made scapegoat, diverting attention from the high and mighty, that is Hainsworth and his political friends, whose incestuous links to City & Colonial, if discovered would certainly be their undoing.
Cornucopia Page 33
