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World's wealthiest stymied as swooning markets erase 2015 gains

Tuesday, December 29, 2015 - 16:43

[LONDON] The richest people on Earth became a bit poorer this year.

The world's 400 wealthiest individuals shed US$19 billion 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 US$65 billion. "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 Dec 28, as his America Movil SAB dropped 25 per cent in 2015. The world's richest person in May 2013, Mr Slim fell to No 5 this year after losing almost US$20 billion as regulators ratcheted up efforts to break apart the business that controls the majority of Mexico's landlines and mobile phones.

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

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

His 20 per cent rise was still US$19 billion short of the increase for the year's top-gainer, Amazon.com Inc founder Jeff Bezos. The New Mexico-born billionaire more than doubled his fortune to US$59 billion as investors cheered profits at the world's largest online retailer. Mr Bezos added US$31 billion in 2015, undoing the US$7.4 billion 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 swung from early-year increases to sharp declines in the later months, with the MSCI ACWI Index falling 3.8 per cent by the end of trading on Dec 28.

The world's 400 richest people control a combined US$3.9 trillion, 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 US$4.3 trillion, a US$267 billion increase from Jan 1. In August they lost those gains and more when a global sell off claimed as much as US$182 billion in a week.

Mr Bezos and Mr Ortega dominated the upside of the year's gyrations, adding $43 billion 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 US$35 billion 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 US$500 million 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 per cent this year.

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 US$1.5 billion. 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 SA's chairman and CEO and the stock plunged by almost half. His fortune, which peaked at US$4.9 billion in September 2014, ended the year at US$1.8 billion. 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 US$2.2 billion jump. His partners Marcel Telles and Carlos Sicupira increased their fortunes by about US$1.7 billion 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 NV, the beer giant that agreed to buy to acquire SABMiller in a US$110 billion deal.

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

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 US$55 billion in 2014 after the West imposed sanctions in the wake of President Vladimir Putin's annexation of eastern Ukraine.

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 Dec 28 who lost US$8 billion 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 US$81 billion to their total net worth, led by Mr Bezos's US$31 billion rise. Facebook CEO Mark Zuckerberg became US$12 billion 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 Inc. They gained a combined US$20 billion.

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 US$32 billion 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 US$10 billion 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 US$10 billion.

In Nigeria, where tumbling oil prices caused slower growth and the Nigerian Stock Exchange All Share Index dropped 22 per cent, Africa's richest man, Aliko Dangote, suffered his second-straight year of losses. The owner of the continent's biggest cement producer, Mr Dangote now has US$14 billion, 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 e-mails requesting comment.

BLOOMBERG