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World's wealthiest end year poorer after tough 2015

Dec 30 2015 10:32
Devon Pendleton and Jack Witzig

New York - The richest people on Earth became a bit poorer this year.

The world’s 400 wealthiest individuals shed $19bn in 2015, according to the Bloomberg Billionaires Index. Falling commodities prices and signs of a slower-growing China spooked investors around the world, leading to the first annual decline for the daily wealth index since its 2012 debut.

"After three great years, 2015 stock markets worry-wiggled sideways," said billionaire Ken Fisher, the founder of Fisher Investments that manages more than $65bn. "Fears over an oil glut, soft consumer spending and China breaking like a plate and taking commodities with it saw investors take fright."

Mexican telecommunications mogul Carlos Slim was the biggest decliner on the index at the close of trading in New York on December 28, as his America Movil SAB dropped 25% in 2015. The world’s richest person in May 2013, Slim fell to No 5 this year after losing almost $20bn as regulators ratcheted up efforts to break apart the business that controls the majority of Mexico’s landlines and mobile phones.

Gates and Buffett count their losses

US investor Warren Buffett, the world’s third-richest person, lost $11.3bn as Berkshire Hathaway had its first negative annual return since 2011. Microsoft co- founder Bill Gates, the world’s richest person since May 2013, fell by $3bn during the year.

Gates’s losses and the continued rise of Inditex SA, the world’s largest fashion retailer, lifted Spain’s Amancio Ortega within about $10bn of the top slot. Ortega, Europe’s richest person since June 2012, leapfrogged Slim and Buffett as he rose $12.1bn to $73.2bn.

His 20% rise was still $19bn short of the increase for the year’s top-gainer, founder Jeff Bezos. The New Mexico-born billionaire more than doubled his fortune to $59bn as investors cheered profits at the world’s largest online retailer. Bezos added $31bn in 2015, undoing the $7.4bn decline he had in 2014 and propelling him up 16 positions to No 4 on the index.

The shifts at the top came as global stock markets swang from early-year increases to sharp declines in the later months, with the MSCI ACWI Index falling 3.8% by the end of trading on December 28.

Wild swings

The world’s 400 richest people control a combined $3.9trn, according to the index, more than the GDP of every country on Earth except for the US, China and Japan. At their peak on May 18, the billionaires had almost $4.3trn, a $267bn increase from January 1. In August they lost those gains and more when a global sell off claimed as much as $182bn in a week.

Bezos and Ortega dominated the upside of the year’s gyrations, adding $43bn between them. The performance of the two billionaires contrasted with the family that owns about half of Wal-Mart Stores, the world’s largest retailer. The five members of the Walton family lost a combined $35bn in 2015.

The market declines knocked 49 billionaires off the daily ranking this year, including Glencore chief executive Ivan Glasenberg and Wang Jing, a Chinese telecom entrepreneur who personally invested $500m to help Nicaragua build an alternative to the Panama Canal. Glasenberg lost two-thirds of his fortune as he raced to slash debt at the Swiss commodities company and Wang fell by about 86% this year.

Brazilian corruption

Brazilian banking billionaire Andre Esteves, former head of Latin America’s largest independent investment bank who was last ranked by the index in 2014, fell even further this year when his fortune declined by $1.5bn. Esteves was hauled off to jail by police in November for allegedly trying to interfere in a corruption investigation.

After his arrest, he stepped down as Banco BTG Pactual’s chairperson and CEO and the stock plunged by almost half. His fortune, which peaked at $4.9bn in September 2014, ended the year at $1.8bn. His lawyers said in December that the billionaire was arrested solely because he’s rich. He was released after the country’s supreme court ended the imprisonment after three weeks and remains under house arrest.

Esteves is the latest to fall in the biggest corruption investigation in Brazil’s history as the government cracks down on graft among the country’s economic elite. The probe, along with a political crisis, a currency rout and a recession took its toll, leaving only four of the 11 Brazil-based fortunes on the index with gains in 2015.

Jorge Paulo Lemann, the co-founder of New York-based buyout firm 3G Capital and Brazil’s richest person, led the gains with a $2.2bn jump. His partners Marcel Telles and Carlos Sicupira increased their fortunes by about $1.7bn combined, as 3G joined forces with Warren Buffett to merge Kraft Foods Group with HJ Heinz. The three billionaires are also key shareholders in Anheuser-Busch InBev, the beer giant that agreed to buy to acquire SABMiller in a $110bn deal.

China's billionaire bubble bursts

China’s billionaires had the wildest ride in 2015. On January 1, there were 23 Chinese billionaires on the index with a combined net worth of $205bn. At their May 27 peak there were 31 with a combined $348bn. On December 28 there were 28 billionaires with $256bn.

As markets there surged, China became a veritable billionaire factory, with more than 50 new billionaires minted in the first half of the year. By July, the bubble had burst. Out of the 50 billionaires created in the first half of the year, only 19 remained billionaires in August.

Russia’s wealthiest continued to experience their own tumult. The country’s richest people lost $55bn in 2014 after the West imposed sanctions in the wake of President Vladimir Putin’s annexation of eastern Ukraine.

Oil plunge

This year, plunging oil prices and the enduring chill of sanctions contributed to the country’s first economic contraction in six years. There were 19 Russians on the 400 on December 28 who lost $8bn during the year. The group was on track to claw back their 2014 losses until June, when the price of oil - Russia’s biggest export - began to dive.

Technology was the best-performing industry for billionaires in 2015. The 44 technology billionaires added $81bn to their total net worth, led by Bezos’ $31bn rise. Facebook CEO Mark Zuckerberg became $12bn wealthier as the social network embarked on a renewed mobile advertising push and its vast audience grew even bigger. Strong ad sales also boosted the fortunes of Sergey Brin and Larry Page, the co-founders of Google parent Alphabet. They gained a combined $20bn.

Aliko Dangote suffers second year of losses

The 31 metals, mining and energy billionaires on the index were hit hard as a collapse in prices for oil copper, iron ore and other natural resources shaved $32bn from their fortunes. Australia’s richest person, Gina Rinehart, lost more than a quarter of her wealth as iron ore plunged by almost half. Rinehart started shipping iron ore from her $10bn Roy Hill mine this month, boosting global supply which some analysts say could contribute to a further slide in price. She’s the world’s 10th-richest woman with almost $10bn.

In Nigeria, where tumbling oil prices caused slower growth and the Nigerian Stock Exchange All Share Index dropped 22%, Africa’s richest man, Aliko Dangote, suffered his second-straight year of losses. The owner of the continent’s biggest cement producer, Dangote now has $14bn, about half what he had at his peak in January 2014.

The billionaires cited either declined to comment or didn’t respond to calls and emails requesting comment.

Hidden billions

The Bloomberg index uncovered 115 new or little-known billionaires in 2015. In November, Wal-Mart heiress Christy Walton lost her title as America’s second richest woman after recently-unsealed court documents revealed that her late husband, John T Walton, gave a third of his Wal-Mart shares to their son, Lukas. At 29, he’s the 92nd-richest person in the world with $11bn.

Elsewhere in the US, the rise of dominant investment banks, Goldman Sachs Group and JPMorgan Chase & Co made billionaires of their respective chairpersons, Lloyd Blankfein and Jamie Dimon, both of them rare instances of hired managers accumulating extraordinary wealth. The October initial public offering of iconic supercar-maker Ferrari cemented the billion-dollar fortune of second-generation heir, Piero Ferrari.

In Hong Kong, Yeung Kin-man has amassed a $10bn net worth through Biel Crystal Manufactory, one of the biggest makers of glass covers for iPhones and other smartphones. Yeung’s rise came on the heels of the March initial public offering for Biel competitor Lens Technology Co that made Zhou Qunfei China’s richest woman. Zhou’s fortune increased more than $5bn to $7.9bn this year, a rise of 254%, the largest on the index.

As turbulent as 2015 may have been, 2016 may be even more so, according to Larry Adam, chief investment officer for Wealth Management Americas at Deutsche Bank.

"We’re going to see a lot more volatility than we’ve seen over the past couple of years," said Adam, who sees emerging market currencies and uncertainty around the US election among the major market risks. "Much more muted performance and much more volatility. Caution is warranted."

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