18/02/2009 - 22:00

Princely experience in fund’s Perth plan

18/02/2009 - 22:00

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THE fallout from the global financial crisis has left many big investors with red faces as poor due diligence or undue risk taking has been exposed by the seismic wrenching in the financial system.

Princely experience in fund’s Perth plan

THE fallout from the global financial crisis has left many big investors with red faces as poor due diligence or undue risk taking has been exposed by the seismic wrenching in the financial system.

But one group seemingly taking advantage of the current climate, the Brunei Investment Agency, has been there before.

The sovereign wealth fund of oil-rich South-East Asian nation Brunei, the agency represents the wealth of one of the last royal dynasties, headed by the Sultan of Brunei, the world's richest man until Microsoft founder Bill Gates took that crown in the mid-1990s.

The BIA has paid $12 million for a 20 per cent stake in Perth-based national broker Patersons Securities, which has gone on a merger spree since the stock market crashed in October.

Those involved in BIA no doubt remember how a financial crisis can expose poor management.

In 1997, at the height of the Asian financial crisis that rocked the emerging economies of the region, BIA reportedly discovered billions of dollars missing from its investment portfolio, which was thought to be worth about $US30 billion at the time.

The discovery was made when the Sultan offered to bail out several of neighbouring countries, only to discover he did not have the funds to give away.

Blame was apportioned to his brother, Prince Jefri, who as Brunei's finance minister had been responsible for the fund since its inception in 1983 and was also known for his lavish lifestyle.

The prince had created a conglomerate called Amedeo Development Corporation as an investment vehicle for BIA's non-petroleum sector investments.

He hit the headlines in the early 1990s for buying luxury hotels in the world's glamour capitals. The prince was also behind the building of a giant amusement park in Brunei, which drew upon the services of many Perth-based experts during the construction phase.

Amedeo collapsed in the midst of the Asian financial crisis, wiping out somewhere between half and 95 per cent of BIA's asset base, according to various reports.

Prince Jefri fled to exile in London but was pursued by BIA through the English courts, demanding the return of about $US15 billion in assets.

In November 2007, Britain's Privy Council ordered that the prince must abide by a previous out-of-court settlement and transfer to BIA his remaining assets not yet transferred under the settlement, including the New York Palace Hotel, the Hotel Bel-Air, residential properties in London, Paris and Singapore, as well as valuable diamonds and significant amounts of cash.

As recently as six months ago, Prince Jefri was reported by the British press to be in more legal hot waterafter a High Court judge threatened to jail him for failing to appear over contempt of court charges with regard to his failure to hand over about $3 billion in assets.

In the interim, BIA's investment base appears to have reached about $US30 billion, including the hotels recovered from the prince, which are now part of its UK-based Dorchester hotel chain.

While declining to comment on the reasons or strategy behind the purchase by BIA, Patersons executive chairman Michael Manford said BIA was a good strategic partner.

"It allows us to continue on with growth opportunities," he said.

 

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