Nicolas Berggruen is passionate about investing. A compact, handsome billionaire, Mr. Berggruen is often talked about for his eccentricities — he does not own a home, preferring to jet around the world and live out of hotels — but his ability to find, invest in and turn around neglected companies points to a hardened and savvy approach.
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Nicolas Berggruen has been investing in what he calls mismanaged companies in retailing, media and real estate.
And while a series of extreme events in global financial markets this year have shaken investors’ confidence, he maintains his strategy of investing in undervalued companies. In fact, the general sense that things are bad and could get worse seem to have little effect on him.
“I continue to do the same thing,” said Mr. Berggruen, who would not disclose his net worth beyond saying it was more than the $2.2 billion estimated by Forbes. “I buy businesses that deserve to exist but have been mismanaged. I feel there are more opportunities now.”
His focus is retailing, media and real estate. He picks companies in these areas, he said, that have lost a lot of their value because of macroeconomic events beyond their control, and he expects them to rebound, eventually.
“I’m not optimistic in the short term,” Mr. Berggruen said. “I just think that if some businesses are going to survive it’s worth investing now as long as it’s a real business, and as long as you don’t have to sell the stock to make a mortgage payment or eat next week.”
Concerns about the ability to cover basic expenses and a fear of losing more money after the losses in the 2008 crisis are keeping most people on the sidelines. They have plenty of reasons to be there. Stock markets rise and fall like a stomach-churning roller coaster ride. European leaders have been slow to devise a resolution for the debt crisis in Greece, which has rippled through the European banking system and into other European countries.
While Mr. Berggruen has a front-row seat on the political problems in the United States through his nonprofit policy foundation, the Nicolas Berggruen Institute, he doesn’t necessarily like what he sees. So he is looking long term.
In his belief that various assets are undervalued, he represents people who see opportunities and are moving their money from cash into investments. These investors are not looking for the hottest new investment but searching for companies that are strong and have continued to perform, regardless of what their stock prices say.
“Real big fortunes have been made in times of hardship,” said Karl Wellner, chief executive of Papamarkou Wellner, an advisory firm that works with wealthy families and has $3 billion under management. “These people are looking at it from a different perspective.”
While these investors are contemplating the perils of the market and how to safeguard and build their wealth, President Obama and others, including the billionaire investor Warren E. Buffett, have called for increased taxes on the wealthy. These proposals come in different forms, and how they may apply to the investors described in this article is not clear — nor are the prospects that any such proposal will be enacted.
The Senate majority leader, Harry Reid, for example, recently proposed a 5 percent surtax on all income over $1 million, including capital gains and dividends.
Many of these investors have enough wealth to buy millions of dollars of some asset and the time to wait to see what happens. If that investment appreciates wildly, they have increased their fortune; if it goes to zero their standard of living will not change.
But even with the luxury of time and wealth, some of them can find ample reasons not to invest right now.
“Why should I plow money into the market because it has dropped, when it can drop some more?” said Fred Branovan, the president and chief operating officer for FFC Capital Management, which is the family office for Milton Fine, who sold his hotel company to Wyndham Resorts in 1998 for $2.1 billion. “This family is into wealth preservation. They got rich; now they want to stay rich.”
While Mr. Berggruen is confident about the long term, he acknowledged that the next few years could be bleak. “I’m scared like everyone else is because the world is scary,” he said. “I just don’t think the world will disappear.”
The amount of money it takes for even wealthy investors to feel comfortable with risk is staggering. Todd M. Morgan, senior managing director at Bel Air Investment Advisors, which manages money for high net-worth investors including Hollywood celebrities, said he had clients who were worth $25 million to $30 million and remained entirely in bonds.
Those who are worth more than $100 million are comfortable taking some risk but rarely with more than 20 percent of their assets — and many of them define risky as being in blue-chip stocks.
“In a perfect world you should be selling some bonds and buying some high-quality stocks,” Mr. Morgan said. “But the stock market is the only place in the world where if there’s a big sale no one comes out and buys.”
Those who are investing now fall into three distinct approaches: the bargain hunters, the natural resource crowd and the bettors.
Bargains are everywhere right now, and those looking for them do not have to go into the riskiest assets.
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