Best of the Financial Times

1Best of the FINANCIAL TIMES
Letter from the Editor
If you thought the FT was just about busi-
ness, I hope this sample of the Financial
Timesnewspaperwillbeapleasantsurprise.
It’struethatwe’rerenownedforourbusi-
ness and finance journalism. But open our
pink pages and you’ll find we’re a broad
church. Our award-winning journalists
cover everything from the most pressing
globalissuestothelightersideofofficelife,
viasport,fashion,tech,politicsandpeople.
In this ‘Best of the FT’ we offer you arti-
clesofvarioustypesandtopics,takenfrom
the newspaper over the last few months.
You’ll find samples of our Special Reports
and our in-depth Investigations; of our
BusinessLifesectionandourBigRead.It’s
justataster,butitwillgiveyouaflavourof
our full range.
We’ve also provided a little background
on the stories – from the writers who have
illuminated every twist and turn of the
Greek debt crisis, to how we scooped an
exclusive interview with global pop star
Pharrell Williams.
Astand-outfeatureoftheFTisourstable
of top columnists; here we introduce you
tojustafew.Theyexpresstheirviewswith
wit,clarityandvigour,keepingourreaders
entertained while giving them fresh and
stimulating perspectives.
Inanincreasinglycomplicatedandnoisy
world,ournewspaperoffersaconcisedaily
account of the things that matter. It also
offers serendipity; as you turn the pages,
you come across great stories and valua-
ble insights you could easily miss online.
Above all, it offers an independent voice
that people trust.
I hope you enjoy discovering us; I hope
youfindusoriginal,interestingandhighly
readable;andIhopeyou’llseewhyreaders
of all kinds are devoted to their daily FT.
Welcome to a small sample of the best of the Financial Times
Monday
• FTfm – the voice of the global fund management industry. As well as prices and FT fund
ratings it provides sharp analysis and debate for the world’s top asset managers and most
serious private investors.
• Sporting view – the best feature writing and sports in stats.
• Lucy Kellaway – weekly column poking fun at management fads and jargon and
celebrating the ups and downs of office life
Tuesday
• Janan Ganesh – Incisive take on UK politics.
• Gideon Rachman – Provocative column from our chief international affairs writer.
Tuesday-Friday
• Markets Insight – incisive comment on financial markets and the macro trends, policy
action and political decisions that move them.
• Smart Money – FT writers including John Authers on investment themes: everything
from hedge fund behaviour to stock picking and the psychology of fund managers.
• Short View – a daily dose of thinking about macro-investment.
Wednesday
• Martin Wolf – chief economics commentator writes about globalisation, global finance
and macro-economics.
• Inside Asia – tackles subjects from corporate governance to pay trends in the most
dynamic region of the world.
Thursday
• Chris Giles, economics editor – Writes a fortnightly column on the UK economy.
• Inside Europe – explains the context and controversies behind Europe’s biggest
business stories.
• Executive Appointments (UK only) – leading recruitment channel for executive level
positions in both the private and public sectors, includes columns covering recruitment,
human resources issues, and non-executive leadership.
Friday
• Inside Tech – Richard Waters reports from Silicon Valley on latest tech trends.
• Robert Shrimsley – Weekly Notebook, a satirical look at the week’s news.
Weekend
• FT Weekend – brings art and culture to life through intelligent and thought provoking
coverage. From property to wine choices, from celebrated book reviews to an intelligent
look at global travel, style and culture - there is something to delight and inspire all of
our readers.
Highlights throughout the week…
Saturday 8 August / Sunday 9 August 2015
Follow us on Twitter @FTLifeArts
Peakexposure
ReinholdMessner’s
mountain-topmuseum
TRAVEL PAGE 7
Crazyforcannabis
HighhopesforSilicon
Valley’shotnewsector
SPECTRUM PAGE 13
GillianTett
PaulMason’scritique
ofcapitalismreviewed
BOOKS PAGE 8
NellZink
Author
What are your plans for the summer?
I have no travel plans. My love keeps a
carefuleyeontheweatherforecastand,
when there’s going to be sun, we hop on
our respective trains and meet in the
wildernessnearBitterfeld,Germany.
Whoisyouridealtravelcompanion?My
most intense experiences of strange
places are solitary. But I like leading
friendstoplacesI’vebeentobeforeandI
alsoliketobeled.
What do you think a holiday is for? For
me, it’s about finding out new things. I
get all the sun and sand I need in the
gravelpitsofBitterfeld.
Howdoyoutakeyourholidayphotos—
on a smartphone, a camera or with a
selfiestick?Andwillyousharethemvia
social media? I never take pictures.
Skies are much larger in reminiscences
and my friends are much better-
looking. Photos crop reality into
little squares; instead, I have very good
binoculars.
What do you like to bring home with
you? Almost always a T-shirt for my
friend Fred in Berlin. Now that he has a
job in the public eye (in an ice-cream
parlour), he can show off his coolest
T-shirtsdaily.
Whatdoyouenjoymostandleastabout
travelling? I exult in little triumphs of
problem-solving. In a foreign country I
can feel like an overachiever by just
orderingacoffee.
What’s your most annoying holiday
habit?Panicking.ButIdon’tdoitoften.
What’stheworstexperienceyou’veever
had on holiday? Last spring, my love
andIflewhomefrombirdwatchingnear
Gibraltar the same morning the clocks
were put forward one hour. His ancient
GPS kindly tipped us off about the time
change but couldn’t find our off-site
rental car return. Yet it was also one of
mybestexperiences,becauseofthegra-
ciouswayheoverlookedmymeltdown.
What’syourholidayreadingrecommen-
dation? Sometimes I read books people
leave lying around in hotels. In Spain
last year I enjoyed a memoir about gay
art collectors, The Sorcerer’s Apprentice
(1999) by John Richardson. Especially
goodifyou’reheadedforProvence!
JeremyPaxman
BroadcasterandFT
contributingeditor
I’m going to a rather special part of
Greece, which happily is not particu-
larly easy to get to and therefore has
very few tourists. I’m not sure how the
state of the banks is going to affect
things but I love the combination of
stunningmountains,terrificswimming,
simplefoodandendlesssunlight.
What do you think a holiday is for? Are
youserious?It’sforsteppingoutofyour
quotidian self. People who spend their
holidays doing what they do at home
shouldstaythereandsavethemselvesa
bitoftrouble.
social media? Although I usually take
a camera, I rarely use it, having discov-
ered I have no talent. Sharing holiday
snaps on social media is an act of
arrogantvanity.
you? I have brought home far too many
bottles that seemed enjoyable on holi-
dayandprovedgut-wrenchingathome.
My brother used to refer to particularly
headache-inducing nights as “top-
shelfers” because, at about 2am, we
ended up tackling the holiday drinks
thathadbeenconsignedthere.
travelling? I used to spend much of the
year travelling, often to wars or disas-
ters.ButeventhenIfoundIsharedSom-
erset Maugham’s view that leaving
Englandmakesonefeelintenselyalive.
dation? I’m taking Anna Karenina,
which,tomyshame,Ihaveneverread.
habit? Where to start? I have plenty,
something that you wouldn’t be able to
doathome.
MikhailFridman
Businessman
EveryyearIgotothesamehouseinTus-
cany with my family. We like opera and
history so it’s perfect for us. We head to
theRossiniOperaFestivalinPesaro.
What do you think a holiday is for?
Experiencing something new as a fam-
ily.It’saboutmakingnewmemories.
social media? I don’t take photographs
orselfies.Ileavethattomypartnerand
children.Ipreferprivacy.
you? Apart from memories — Italian
wineandextravirginoliveoil.
habit?Ifitgetsabove33C,formeit’sjust
like minus-33C; I don’t like doing any-
thingapartfromreadingandlyingdown
duringtheday.
had on holiday? Camping as a student.
Wecouldn’tgetaroominahostelsothe
four of us lived in a tent. We made soup
andmanagedintheprocesstogiveour-
selvesacutefoodpoisoning.
DianevonFürstenberg
Fashiondesignerand
businesswoman
Sailing with my family and friends on
ourboatintheMediterranean.
Who is your ideal travel companion?
My family, of course. But there is noth-
ingmorethrillingthanarrivinginanew
placeonyourownandfeelingthesense
ofpossibilitythatbrings.
Do you go online or use social media
when you are away? I am always on
emailandIliketoInstagram.
you? I love to shop in the local markets
whereverIgo.
Continuedonpage2
you? I always come home with more
stuff than I left with. When I’m away I
collect postcards and send them to my
Dad.Hehasquiteacollectionnow.
habit?Itaketoomanypictures—which
is why I always need extra memory on
myphone.
hadonholiday?IgotreallysickinMex-
ico once but I didn’t let it stop me from
doing anything. I couldn’t spend my
timesittingarounddoingnothing!
dation? Don’t read; instead, go and do
I’m not at my desk now
Writers, fashion designers and business leaders share their best and
worst memories of holidays past — and their plans for this season
Alex Katz: This is Now
This summer at the
High Museum of Art in
Atlanta, Georgia, a major
exhibition of works by the
American figurative artist
is being held. Born in 1927,
Katz has since produced a
celebrated body of work.
The pieces shown here —
‘Summer Picnic’ (1975)
above; ‘White House 2’
(2012) below — are
among 60 on display.
‘Alex Katz: This is Now’
runs until September 6,
high.org. For a slideshow
of more works go to
ft.com/katz
and I imagine they’re much the same
whetherI’mathomeoraway.
StevenPinker
Psychologistandauthor
After 10 days in Turkey and Greece on
a sailing cruise, I’ve settled into my
summer house in Truro, on the wrist of
CapeCod.
Whoisyouridealtravelcompanion?My
wife, the philosopher and novelist
Rebecca Goldstein. We both walk tire-
lessly and crave historical interest — no
roadsideplaquegoesunread.
social media? I’m a camera slut and
travel with a minimum of two profes-
sional cameras. After weeks of editing,
I share the results on my photography
website.
travelling? Most: new experiences and
clearing one’s mind of daily burdens.
Least: guided tours. I’m sceptical of the
museum-plaque theory in which the
ancientsneverdidanythingforstraight-
forwardreasons.Sportswere“initiation
rites”; jewellery was “an indicator of
socialstatus”.
had on holiday? Driving on a smoggy
Italian autostrada in a car that had as
much power as the kind mounted out-
sideAmericansupermarketsthatgoup
anddownwhenyoudropinacoin.
HeatherWatson
Tennisplayer
Who’s your ideal travel companion? A
very patient person because there are a
lotofqueueswhentravelling.Aswellas
being my coach, my dad is also a great
travelcompanion.
social media? I absolutely love taking
photos; I take all my pictures on my
smartphone. I don’t think I could ever
own a selfie stick because I’d be too
embarrassedtouseit,althoughIdolove
takingaselfie!And,yes,Idopostalotof
picturesonsocialmedia!
AUGUST 8 2015 Section:Weekend Time: 7/8/2015 - 15:33 User: gouldp Page Name: WIN1, Part,Page,Edition: WIN, 1, 1
owners. “A significant part of the Jibo
experience is when it’s just hanging out
— the ambient persona, when it’s there
but you’re not tasking it to do some-
thing,” she says. Such traits are how
Jibo will differentiate itselffrom smart-
phones’ virtual assistants such as
Apple’s Siri, Microsoft’s Cortana or
GoogleNow.
A more ambitious robotics venture is
in Japan, where SoftBank has started
selling Pepper, a 1.2 metre-tall human-
oid robot that costs Y198,000 ($1,600).
With two arms, big round eyes and a
screenonitschest,thesleekwhiterobot
purports to be able to understand and
respondtohumanemotions.
Bruno Maisonnier, co-founder of
Aldebaran,theFrenchcompanybehind
Pepper, which SoftBank acquired in
2012,toldtheFTattheConsumerElec-
tronics Show in Las Vegas in January
that robots must ultimately look more
like people if they are to “fight loneli-
ness” — especially among older people
—andaidcommunication.
“The majority of the message you
sendtosomeoneisn’tthroughthewords
we are using, it is body language and
expression,” says Maisonnier, a special
advisertoSoftBank.“Ineedmyrobotto
Continuedonpage11
C
olin Angle may run a
robotics company but even
he struggles to corral the
automatons in his home.
As the chief executive of
iRobot, he has no complaints about
his company’s Roomba self-piloting
vacuum cleaners, of course. But the
co-founder of one of the world’s largest
makers of domestic robots is frustrated
with the expensive home automation
system he installed at his home in
Massachusettsafewyearsago.
The heating cannot keep up with his
oft-changing schedule and the biggest
advance to his lighting is being able to
turn on several bulbs with one switch
rather than three. Maintenance visits
arerequiredalltoofrequently.
“Here I am, with 25 years as CEO of a
robot company, using almost none of
the power of a smart home system,”
says Angle. “I was as excited as anyone
when I put it in about snapping my fin-
gers and having soufflés made. But it
wasn’tthereality.”
Robots are starting to change the
way we live, but not in the way that
scientistspredicted50,oreven10,years
ago. At a time when some technologists
are fretting about the threat of killer
robotsbeingusedonthebattlefield,the
coming wave of domestic robots are
much more tame, or even mundane.
Ratherthanandroidsmarchingintoour
kitchens and living rooms, automation
is creeping into our home appliances,
securitysystemsandevengarages.
Yetwhiletheadditionofwirelesscon-
nectivity has brought a semblance of
intelligence to our thermostats and
lightbulbs, by turning our smartphones
intoremotecontrolsforthe“internetof
things”, installing, using and managing
all these new devices remains a labour
ofgeekylove.
“There is a whole lot of experimenta-
tion around the space of connecting
things but I would say it is not all suc-
cessful — in fact, I would say it is
almost all unsuccessful,” says Angle.
“Thereisnotenoughbenefitintheeyes
oftheconsumer.”
Arobotrevolutionhasbeenpredicted
for centuries. Leonardo da Vinci is said
to have created a mechanical knight in
1495 that could stand, sit, and move its
arms.Yetwearestillalongwayfromthe
“robot housemaid” that sci-fi author
Isaac Asimov predicted in a 1964 New
YorkTimesessaywouldbeavailableby
now: “Large, clumsy, slow-moving but
capable of general picking-up, arrang-
ing, cleaning and manipulation of vari-
ousappliances.”
However, aside from some examples
such as vacuum cleaners, Asimov, the
author of I, Robot, was right about one
thing 50 years ago: “Robots will neither
be common nor very good in 2014, but
theywillbeinexistence.”
More recently, Bill Gates in 2006
promised a future in which “robotic
deviceswillbecomeanearlyubiquitous
part of our day-to-day lives”, thanks to
advances in sensors, motors and
processingpower.
“Wemaybeonthevergeofanewera,”
Microsoft’s co-founder wrote in Scien-
tific American magazine, “when the PC
will get up off the desktop and allow us
to see, hear, touch and manipulate
objects in places where we are not
physicallypresent”.
Nine years later, Jeremy Conrad, an
investor in early-stage hardware start-
ups at San Francisco incubator Lemnos
Labs, says that automation and roboti-
sation are “major trends we are seeing”
— but not necessarily for the reasons
thatGatespredicted.
“Therealityisthatthechangeisnotin
the core technology,” says Conrad.
Because sensors and other components
are being widely used in smartphones
and other mass-market devices, the
costs are falling for other applications
too. That means a “smart” device,
connected to an existing home WiFi
network, is much more accessible (and
cheaper) than a professional home-
automationsystem.
“There are a lot more good start-ups
out there because they don’t need mil-
lions of dollars to get off the ground.
Investors can now see a path to a prod-
uctthatpeoplecanafford,”saysConrad.
Defining what exactly a robot is,
however, remains a controversial topic
even among those who build and invest
inthem.“There are lots of things inour
homes or our cars that exhibit robotic
behaviour—wejustdon’tthinkofthem
as such because we have this vision of
assistant the remote control for lights,
garagedoorsandevenfrontdoorlocks.
For some in the robotics industry,
though, these sorts of applications are
not ambitious or useful enough — even
if they serve as inspiration for what
comesnext.
Cynthia Breazeal, director of the Per-
sonalRobotsGroupatMIT’sMediaLab,
describes her start-up Jibo as the
“iPhoneofrobotics”.Whenitisreleased
next year, Breazeal promises that a Jibo
placedonadeskorkitchencounterwill
not only be able to see, hear and speak
but learn a family’s habits, relay mes-
sages between family members, make
helpful suggestions and reminders —
andevenprovidecompanionship.
“Because of the mobile computing
revolutiondrivinglargesalesofcameras
and microprocessors, it’s possible to
buildacompellingexperienceatamass
consumer price point that wasn’t even
possible two years ago,” says Breazeal.
The device looks like a cross between a
Dyson fan, a curvy desk lamp and Eve,
therobotinPixar’sWall-E.Ithasalready
raised $3.7m from pre-orders through
crowdfundingsiteIndiegogo.
Breazeal is pitching Jibo, which will
sell for about $750, as a “social robot”
with its own personality and character
that, she claims, will get to know its
a humanoid robot,” says Jen McCabe,
a director at electronics manufacturer
Flex’s innovation unit. “The robotic
movement of Nest is behind the ther-
mostat but [just because it isn’t visible]
doesn’tmakeitanylessrobotic.”
The Nest thermostat, which was
bought by Google for $3bn last year,
learns the comings and goings offamily
members to predict when to heat and
coolahouse,helpingtosaveenergyand
ensureacomfortablehome.Nest’sther-
mostat also communicates with its
home security camera to know when to
switch itself on and off, or with certain
makesofcars,whichtelltheheatingsys-
tem when the driver is on their way
homesoitcanwarmupthehouse.
Otherbigtechcompaniesarechasing
similar goals. Amazon’s Echo, for
instance, is an internet-connected
speakerandmusicplayerthatresponds
to its owner’s voice. This way, the Echo
can be used to turn on and off WiFi-
enabled Philips Hue lightbulbs and
Belkin WeMo electrical switches, not
with a Wallace and Gromit-style
mechanical arm but by putting itself at
the centre of a wireless network of con-
necteddevices.
Apple has its own plans for a “smart
home” platform too, called HomeKit,
that will make the iPhone and its Siri
Saturday 1 August / Sunday 2 August 2015
Edinburghrevamp
Newdevelopments
forAuldReekie
UK PROPERTY PAGE 3
MelvynTan
Singapore-bornpianist
onhislifeinLondon
EXPAT LIVES PAGES 10 & 11
Dance-starcolonel
China’ssex-change
answertoOprah
AT HOME PAGE 2
Robots, but not as we know them
How WiFi-controlled smart-home technology could soon develop into droids as pets or even family friends. By Tim Bradshaw
‘I was excited about
snapping my fingers and
having soufflés made.
But it wasn’t the reality’
James Fryer
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july 11/12 2015
Spy academy: what
goes on inside
Israel’s Unit 8200
The other Vladimir P:
a Soviet icon on
Russia today
World Markets
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Euro Stoxx 50 3597.86 3583.79 0.39
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€ index 85.091 85.630
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Jul 31 prev
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INTEREST RATES
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Prices are latest for edition Data provided by Morningstar
JUDITH EVANS
Car parking spaces at London’s Gat-
wick airport are being sold as invest-
mentsfor£25,000eachtopensionsav-
ers in the latest bizarre alternative
investment to be marketed since
April’sretirementrevolution.
Park First, an unregulated scheme
promises a “guaranteed” 8 per cent
yieldforatleasttwoyears,toUKsavers
who have become a magnet for both
mainstream and high-risk investment
sales since gaining new freedoms in
usingtheirpensionsavings.
Thereisjustoneproblem:ParkFirst’s
sistercompanyStoreFirstwasinvolved
with pension schemes that paid almost
50 per cent commissions out of inves-
tors’moneyandleftthematleast£1.6m
out of pocket, according to the Insol-
vencyService,agovernmentagency.
ParkFirstsaysitcanofferretailinves-
tors the chance to buy an individual
parking space at Gatwick. “You will
receive a 25 per cent rise in capital
growthfromdayoneontheassetvalue,”
publicitymaterialsclaim.
Dale Mills, a health service worker,
investedalumpsumfromhispensionin
Park First, through “introducer” com-
pany PCG Invest. “I felt comfortable I
wasn’t throwing money into a black
hole,”hesaid.
DarrenBrown,chiefexecutiveofPCG
Invest, concedes not all may be as it
seems. “Park First are offering to relist
the land you’re buying at 25 per cent
overwhatyoupaidforit,butwhetheror
nottheysellitisanothermatter.”
Tim Wixted, director at law firm
NeglectAssist, said: “There is no liquid
market — indeed, there is probably no
market whatsoever for the sale of air-
port car parking spaces.” He said the
guaranteed teaser rate smacked of a
schemethatis“doomedtofail”.
In the case of Store First, the Insol-
vency Service said people were per-
suadedtotransfertheirsavingsintotwo
pension schemes, where the money
would be placed into storage pods. But
StoreFirstthenpaidcommissionsofup
to 46 per cent to another company, the
servicesaid.
TobyWhittaker,managingdirectorof
ParkFirstandStoreFirst,said:“Neither
I, nor any of my companies, has any-
thingtodowithsettingupthetwo[pen-
sion] schemes or administering them”.
Hesaid“commissions”amountingto16
per cent were paid to an agent, Trans-
euro,whichplacedtheorderforstorage
pods.“Iknownothingabout£1.6msup-
posedlybeing‘missing’,”headded.
FT Money separate section
Pensionersofferedpromiseofsky-high
yieldsfromairportparkinginvestment
© THE FINANCIAL TIMES LTD 2015
No: 38,921 ★★
Printed in London, Liverpool, Glasgow, Dublin,
Frankfurt, Brussels, Milan, Madrid, New York,
Chicago, San Francisco, Washington DC, Tokyo,
Hong Kong, Singapore, Seoul, Dubai
9 7 7 0 3 0 7 1 7 6 7 6 0
3 1
Gertjan Vlieghe, the former hedge
fund economist who was appointed
this week to the Bank of England’s
Monetary Policy Committee is set to
sever all his financial ties with Brevan
Howard, his previous employer, after
questions were raised over a possible
conflict of interest. Mr Vlieghe was
originally told he would be able to
keep a financial interest in the hedge
fund, where he was a partner.
Report i PAGE 2
MPC appointee to cut all
ties with former employer
How To
Spend It
Eye-popping
geometricfashion
DonnaKaran
opensher
stylefile
FT WEEKEND MAGAZINE
LedZeppelin’s
JimmyPage on
hispassionforthe
pre-Raphaelites
MAGAZINE
MagazineWhatbigbusinesscouldlearnfromMumbai’sdabbawalas|House&HomeTherobotsroamingourhomes
SATURDAY 1 AUGUST / SUNDAY 2 AUGUST 2015
Briefing
i HSBC close to sale of Brazil unit for $4bn
HSBC is close to a sale of its Brazilian subsidiary to
local rival Bradesco for close to $4bn, as it seeks to
progress on some targets set in June.— PAGE 12
i UK extends full visa to Chinese artist
Theresa May, home secretary, has overturned a
ruling by Home Office officials and granted Chinese
dissident artist Ai Weiwei a full six-month visa to
enter Britain.— PAGE 2
i Prevailing winds lift man of the far left
In a Europe where anti-austerity
parties are on the march, Jeremy
Corbyn, the hard-left candidate to
lead the Labour party, finds himself
centre stage.— PERSON IN THE NEWS,
PAGE 11
i Osborne keen to begin RBS share sale
Chancellor George Osborne is said to be “desperate”
to start the first sale of the government’s shares in
RBS, in which it owns 80 per cent.— PAGE 4
i Sluggish US wage growth a knock to Fed
Quarterly US wage growth is at its lowest level for
more than three decades, denting expectations of a
Federal Reserve rate rise in September.— PAGE 6
i Morale among Ukrainian troops wanes
Amid complaints of exhaustion and being
underequipped, anger and mistrust among
Ukraine’s soldiers towards commanders and
political leaders has grown sharply.— PAGE 7
UK £3.00; Channel Islands £3.30; Republic of Ireland €3.50
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Source: TEA/AECOM
By attendance, 2014 (m)
0 0.5 1.0 1.5 2.0
Chimelong (China)
Typhoon Lagoon (US)
Blizzard Beach (US)
Thermas dos Laranjais (Brazil)
Ocean World (S Korea)
Aquatica (US)
Datawatch
RootandbranchEnglandoverhaul
theirperformancetocrushAustralia
England batsman Joe Root celebrates victory over Australia by eight wickets in the third Ashes
Test at Edgbaston yesterday. England lead the series 2-1. Matthew Engel, Page 2 — Rui Vieira/AP
MILES JOHNSON AND PEGGY HOLLINGER
A US activist hedge fund has become
Rolls-Royce’stopshareholder,inamove
expected to increase the pressure for
change at Britain’s flagship aero-engine
maker.
San Francisco-based ValueAct
revealed it had built up a stake of
5.44percentintheembattledcompany.
Its holding comes at an awkward time
for the group, just three weeks after its
fourth profit warning in 18 months and
as new chief executive Warren East
takesuphispost.
Investors have grown increasingly
exasperatedbytheprofitwarnings,and
a perceived lack of strategic focus. The
shares, which have fallen 25 per cent
over the past year, jumped almost 6 per
centyesterdaytocloseat794p.
Rolls-Royce, which has come under
pressure from some investors to sell its
poorly performing marine engine and
powersystemsbusinesses,saiditwould
be happy to meet ValueAct in the com-
ingweeks.Thegroupsaidithadworked
withthehedgefundinthepast.
“ValueActhasbeenaninvestorbefore
and we constructively engaged with
them before,” said a Rolls-Royce
spokesman. “We welcome any investor
who recognises the long-term value of
ourbusiness.Welookforwardtoengag-
ingwithValueAct, just aswe dowithall
investors.”
ValueAct, founded by the veteran
investor Jeff Ubben, is known for press-
ing management from behind the
scenes to refocus their companies,
eschewing the more boisterous public
criticism ofotherAmericanactivists.
More aggressive activist investors,
which buy into companies with the
hope of forcing through changes, have
traditionally struggled in Europe com-
paredtotheUS. ValueActhashelda1-2
per cent stake in Rolls-Royce for more
than a year, according to one person
close to the situation. Earlier this year
another US hedge fund, Sequoia, which
holdslessthan1percent,voicedstrong
criticism of the strategy pursued by the
company’s management, which it said
“seems willing to destroy shareholder
valueinthenameofdiversification”.
However, a sale of Rolls-Royce could
bedifficult.Thegroup’sindependenceis
protected by the British state’s golden
share and any bid would be likely to
sparkastormofpublicdebate.
Mr East, who took over from John
Rishton as chief executive at the begin-
ning of July, told the Financial Times
thisweek thathebelievedthediversifi-
cationstrategywas“broadlycorrect”. A
strategicreviewwouldbeundertakenin
12-18months,hesaid.
USactivistfund
takesleadstake
inRolls-Royce
3ValueAct builds up 5.4% interest
3Move set to raise pressure for change
The most popular
water park in the
world is in
Guangzhou, China.
In 2013 its visitor
numbers
surpassed those of
Disney’s Typhoon
Lagoon in Orlando,
Florida. However,
four of the world’s
top-10 water parks
are located in the
US city
AUGUST 1 2015 Section:FrontBack Time: 31/7/2015 - 22:20 User: allenk Page Name: FRONT1-LON-02, Part,Page,Edition: LON, 1, 2
World Markets
STOCK MARKETS
Jul 10 Jul 3 %Week
S&P 500 2076.62 2076.78 -0.01
Nasdaq Composite 4997.70 5009.21 -0.23
Dow Jones Ind 17760.41 17730.11 0.17
FTSEurofirst 300 1543.01 1518.35 1.62
Euro Stoxx 50 3528.81 3441.76 2.53
FTSE 100 6673.38 6585.78 1.33
FTSE All-Share 3635.55 3602.47 0.92
CAC 40 4903.07 4808.22 1.97
Xetra Dax 11315.63 11058.39 2.33
Nikkei 19779.83 20522.50 -3.62
Hang Seng 24901.28 26282.32 -5.25
FTSE All World $ 279.28 280.56 -0.46
CURRENCIES
Jul 10 Jul 3
$ per € 1.117 1.110
$ per £ 1.551 1.560
£ per € 0.720 0.711
¥ per $ 122.685 122.725
¥ per £ 190.283 191.489
€ index 85.636 85.614
SFr per € 1.049 1.045
Jul 10 Jul 3
€ per $ 0.895 0.901
£ per $ 0.645 0.641
€ per £ 1.388 1.406
¥ per € 137.077 136.231
£ index 92.012 93.059
$ index 103.110 102.720
SFr per £ 1.456 1.469
COMMODITIES
Jul 10 Jul 3 %Week
Oil WTI $ 52.83 55.68 -5.12
Oil Brent $ 58.72 60.55 -3.02
Gold $ 1159.30 1167.95 -0.74
INTEREST RATES
price yield chg
US Gov 10 yr 97.77 2.38 0.06
UK Gov 10 yr 98.17 2.21 0.12
Ger Gov 10 yr 96.41 0.90 0.17
Jpn Gov 10 yr 99.72 0.43 -0.02
US Gov 30 yr 96.45 3.19 0.07
Ger Gov 2 yr 101.08 -0.14 0.00
price prev chg
Fed Funds Eff 0.12 0.11 0.01
US 3m Bills 0.02 0.02 0.00
Euro Libor 3m -0.01 -0.01 0.00
UK 3m 0.58 0.58 0.00
MILES JOHNSON
— HEDGE FUND CORRESPONDENT
Hedge fund Brevan Howard is moving
someofitsmostseniortradersbackto
LondonfromGeneva,reversingahigh-
profile decision to leave the UK and
bucking concerns that the City’s status
as Europe’s leading hub for the indus-
trywasunderthreat.
The decision comes as several other
large hedge funds are also planning to
expand or launch in the British capital,
in a sign that international investors
continuetogravitatetoLondon.
Hedge fund managers and investors
argue that low tax rates have failed to
win over traders to the merits of life in
Switzerland, with many leaving their
familiesbehindinLondon.
Brevan Howard’s UK-born co-
founder Alan Howard led the charge by
moving to Geneva in 2010, in the wake
oftheintroductionoftighterEUregula-
tion of hedge funds. More than half of
his staff and most of his senior traders
followedhimwithinthreeyears.
But the $27bn hedge fund has started
to brief investors that it plans to move
some fund managers back to London,
people familiar with the group said.
BrevanHowarddeclinedtocomment.
The departure from London to
GenevaofMrHowardaswellasMichael
Platt, head of British hedge fund
BlueCrest, had prompted some in the
industrytofretthatLondonwouldstart
to haemorrhage billionaire traders to
thecantonsofSwitzerland.
While Mr Howard remained in
Geneva, Mr Platt last year relocated to
Jersey.
“TheythinkitwillbefineleavingLon-
don, and that they can come back and
visitallthetimeandthatthefamilywill
adjust,” said one big investor in hedge
funds. “A lot of these traders have just
gotquitebored.”
London’s hedge fund industry is
expandingasUSmanagershireemploy-
eesandlaunchnewfunds.
StevenCohen,whoclosedhisLondon
office after his then-named SAC Capital
admittedinsidertradingin2013,iscon-
sideringreturningtotheCity,according
toanemailsenttoitsstaff.
Chris Rokos, a former star trader at
Brevan Howard, is in the process of
launching what is expected to be one of
the largest new hedge funds in Europe
sincethefinancialcrisis.
Other new launches include Everett
Capital Advisors, being launched by an
ex-employeeofthehedgefundTaconic,
and another fund is being set up by
tradersfromQVT.
BrevanHowardbeginsUKreturnas
hedgefundtraderstireofSwisslife
No: 38,904 ★
9 7 7 0 3 0 7 1 7 6 5 1 7
2 9
The BBC is facing the second part of a
bruising funding battle this week, as
ministers prepare a ‘root-and-branch’
review of the broadcaster. The culture
secretary will look at whether the BBC
should air fewer popular
entertainment shows, do more to
ensure its impartiality, and be subject
to greater oversight from Ofcom. The
issues will be addressed in a green
paper to be published on Thursday.
Report i PAGE 4
BBC pressed by review as
funding battle heats up
Briefing
i Cameron orders more Isis missions
David Cameron, prime minister, has told defence
chiefs to escalate SAS and drone missions against
Isis,afterthegovernment’ssurprisecommitmentto
boostmilitaryspending.— PAGE 2
i China cracks down on margin lending
China is targeting identity fraud and grey-market
margin lending in the latest of a series of aggressive
measures to arrest the slide in the country’s stock
markets.— PAGE 8; TRADING TURMOIL, PAGE 17
i Renzi shakes up Italy’s justice system
The government of Matteo Renzi hopes
that its court-reform campaign will
speed up Italy’s trials and also help
woo foreign investors who have been
wary of the country’s convoluted
justice system.— PAGE 8
i Reddit reassures after ousting of chief
Anarchic discussion website Reddit has assured the
volunteers who help run it that it is in no hurry to
turn a big profit from their work, after 10 days of
tumultthatsawtheoustingofitshead.— PAGE 18
i Barclays eyes purchase to split off unit
Barclaysisconsideringanacquisitionasthequickest
way to gain the extra licence it needs to hive off its
retailbankundernewrulesforcingbigUKlendersto
splitintwo.— PAGE 17; INSIDE BUSINESS, PAGE 18
i Pharma blockbusters fire up sector
The launch of multibillion-dollar medicines has
boosted the pharma industry by helping to offset
patent expiries, but productivity is still being
depressed by high costs.— PAGE 19
i Councils need £1bn extra for living wage
Cash-strapped local authorities will have to find
more than £1bn extra by 2020 to pay for the new
nationallivingwage,accordingtoananalysisbythe
LocalGovernmentAssociation.— PAGE 3
Chinese stock market
Source: Bloomberg
Jul 2014 Jul2015
50
100
150
200
250
300
350
2
3
4
5
Margin debt
($bn)
Shanghai Composite
index (’000)
Datawatch
MONDAY 13 JULY 2015 WORLD BUSINESS NEWSPAPER UK £2.50 Channel Islands £2.80; Republic of Ireland €3.00
Tel: 0800 298 4708
Chinese investors
have been
borrowing heavily to
invest in the stock
market; margin debt
peaked at $366bn in
mid-June. High
levels of margin
debt can mean
sharper falls in share
prices as brokers are
forced to sell to
meet margin calls.
Passports for sale
The lure of visa-free travel and
special tax rules — WORLD, PAGE 8
A cunning coup
Barclays’ skilful skillset sacking
— LUCY KELLAWAY, PAGE 14
It’s time to be bold
World must face up to financial dramas,
says Lawrence Summers — PAGE 11
STEFAN WAGSTYL, DUNCAN ROBINSON
AND ANNE-SYLVAINE CHASSANY
— BRUSSELS
Germanylastnightheightenedthepres-
sure on Greece to implement bolder
economic reforms in order to secure its
place in the eurozone, despite attempts
byFrancetobrokeracompromise.
Fraught negotiations in Brussels over
a€86bnbailoutpackageattheweekend
created fresh uncertainty for Athens’
futureinEurope’smonetaryunionafter
finance ministers failed to agree a way
out of the biggest crisis to face Europe
since2012.
A fragile compromise was emerging
late last night under which Athens
would be forced to pass tough new
reform laws, including on pensions, by
Wednesday and prepare further rapid
reforms that the radical Greek premier
AlexisTsiprashaduntilnowresisted.
But it was unclear whether this deal
couldbeimplementedintimetosatisfy
German chancellor Angela Merkel and
other critics, lead to real negotiations —
or forestall Greece’s financial collapse.
Ms Merkel had said that the weekend’s
talkswouldbe“decisive”.
French president François Hollande
pledged to reach an agreement and
warned that at stake was not just
whether Greece stayed in Europe but
“ourconceptionofEurope”.
But a grim Ms Merkel said: “There’s
not going to be an agreement at any
cost.” Eurozone leaders, she added,
were considering “nothing more and
nothingless”thanthepreconditionsfor
aGreecerescuebyEurope’sbailoutfund
— a stance that appeared to cast doubt
on whether a full accord could soon be
reached.
The Franco-German impasse threat-
ened to strain Ms Merkel and Mr Hol-
lande’srecenteffortstobolstertheEU’s
keypoliticalalliance.Atonepoint,argu-
mentsgotsoheatedthatoneparticipant
described the atmosphere among
financeministersas“violent”.
However, the two leaders’ comments
also left room for manoeuvre, perhaps
allowing a conditional deal that would
pavethewaytobailoutnegotiationsthis
weekifGreecedeliversonthepromised
reformlegislation.
Highlightingthedrama,Luxembourg
has warned Germany that pressing for
Grexit would bring “a profound con-
flict” with France and “catastrophe for
Europe”.Jean-ClaudeJuncker,thepresi-
dent of the European Commission who
last week admitted that the EU’s execu-
tivearmhadbeenworkingona“Grexit”
plan,said:“Iwillfightuntiltheverylast
millisecond to have a deal and I hope
therewillbeadeal.”
The delay is testing the European
Central Bank’s capacity to keep provid-
ing Greek banks with emergency
finance.Withoutprogressinyesterday’s
talks, the ECB would find it difficult to
maintain crucial support. Rescue costs
have risen to €82bn-€86bn, according
to a eurogroup finance ministers’ draft
statement, including €12bn needed in
the next month and €10bn “immedi-
ately”forbankrecapitalisation.
Arriving in Brussels, Mr Tsipras said:
“I am here ready for a compromise. We
owe that to the people of Europe who
wantEuropeunitedandnotdivided.”
Germany exerted maximum pres-
sure, with the finance ministry raising
the possibility of a five-year timeout
from the eurozone for Greece, and
transferring €50bn of assets to an
“externalfund”forprivatisationtohelp
fund debt repayment. Among Ger-
many’s staunchest allies is Finland,
where the populist Finns party threat-
ened to resign from their coalition gov-
ernmentifaGreekbailoutwentahead.
Greece turmoil page 6
Lawrence Summers page 11
Greece’seurozonefutureuncertain
asGermanystepsuppressure
3Fraught Brussels talks over €86bn bailout 3France struggles to broker compromise
Greece’s prime
minister Alexis
Tsipras talks to
Angela Merkel
and François
Hollande at
the start of
yesterday’s
summit meeting
— Olivier Hoslet/Epa
Jean-Claude Juncker,
European Commission
president, said: ‘I will
fight until the very
last millisecond to
have a deal’
JULY 13 2015 Section:FrontBack Time: 12/7/2015 - 21:14 User: piggotta Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
Infrastructure
The European Central
Bank’s bond buying
is crowding out
large investors
PAGE 2
Bubble warning
Hot and frothy biotech may boil over
Asset managers are wary of falling victim to a sudden correction in
the companies that provide cutting-edge research and development
in drugs and healthcare, after the Nasdaq Biotech index nearly
doubled to 3,807 over the past two years PAGE 6 Alamy
CHRIS NEWLANDS
BlackRock, the US investment giant,
has been the big winner of the deci-
sion by the world’s largest pension
fundtoinvesthalfofitsassetsinequi-
ties.
The move by Japan’s Y137tn
($1.14tn) Government Pension
Investment Fund to radically
increaseitsexposuretodomesticand
foreign equities at the expense of
bondshasbeenasignificantboonfor
theUSfundhouse.
BlackRock,theworld’slargestfund
manager, increased the assets it runs
onbehalfofgovernment-relatedpen-
sion schemes in Japan — of which
money from the GPIF forms the bulk
— from Y9.4tn to Y13.8tn in the 12
monthstotheendofMarch.
TherisesawBlackRockbecomethe
second-largest manager of defined
benefit pension assets in Japan
behind Sumitomo Mitsui Trust,
accordingtodatafromtheJapanPen-
sionsIndustryDatabase.
The overhaul of the GPIF’s assets,
which was announced last October,
was the result of almost two years of
pressure from the administration of
PrimeMinisterShinzoAbe.
Mr Abe had been keen to see the
GPIF adopt a much more aggressive
approach in managing its assets, in
order both to meet the rising cost of
pension payouts and to support his
broad programme to haul Japan out
ofyearsofdeflation.
BlackRock
winsbig
fromJapan
retirement
MADISON MARRIAGE
The Swedish government’s plan to
overhaul the country’s pension sys-
tem has prompted condemnation
fromseniorofficialswhofearthepro-
posal will put the entire retirement
frameworkatrisk.
Theproposalwouldleadtotheclo-
sure of two of Sweden’s six state pen-
sionfunds,knownastheAPfunds.
The SKr23.6bn ($2.7bn) private
equity-focused AP6 fund would be
rolled into AP2, the largest of the
funds. One of AP1, AP3 and AP4
would also be closed under the plan,
which is intended to improve per-
formanceandreducerunningcosts.
The funds were deliberately set up
as separate entities to avoid political
meddling. Two of Sweden’s eight
political parties have opposed the
reforms, as well as the head of AP2,
which has escaped the threat of clo-
sure.
Eva Halvarsson, chief executive of
AP2, said: “Sweden’s AP funds work
wellandarecosteffective.Itisimpor-
tant that there are several independ-
ent funds pursuing different strate-
gies.
“If implemented, the reforms will
reducethisspreadofriskandtherel-
ative independence enjoyed by the
AP funds. For Sweden’s pensioners,
the reforms are going to cost more
thantheyareworth.”
In AP2’s latest annual report, Ms
Halvarsson added that eliminating
one or more AP funds “poses signifi-
cantly increased risks”. She said:
“Rather like removing the leg from a
stool,it’slikelytocollapse.”
Per Bolund, Sweden’s financial
markets minister, rejected the sug-
gestionthattheentirepensionframe-
workcouldbejeopardised.
He said: “That is exaggerated. We
would never suggest something that
would harm the pension system.
There has been a long period of good
gainsforthe[APfunds]butweknow
the economy will turn at some point,
and we want to make sure pensions
willstillbepaid.
“Six of the eight [political] parties
in Sweden are behind [this proposal]
— there is broad political unity
around [it] and that is something we
valuehighly.”
The government plan, which is
under consultation until October,
wouldalsoleadtotheestablishmentof
a National Pension Fund Board that
continuedonpage7
Angerover
Swedish
pensionreform
Proposal to close two of six AP funds
fm
THE AUTHORITY ON GLOBAL FUND MANAGEMENT | FINANCIAL TIMES | Monday August 10 2015
20 | FTfm FINANCIAL TIMES Monday 10 August 2015
QUOTE OF THE WEEK
Justina Deveikyte,
Cerulli Associates
‘Feesremainaperennial
bugbearforsomeEuropean
pensions,andiftheywantto
rideonwhathavebeen
generallyrisingmarkets,
therearecertainlycheaper
waystodosothanina
hedgefund’
NEWS, PAGE 3
VIDEO
Retirement shake-up
The UK’s George Osborne
is open to ‘radical change’
in the pensions system
VIDEO.FT.COM/FTFM
INSIDE AND
ONLINE
THE LAST WORD
John Plender
With US interest rates
rising and the dollar
continuing to
strengthen as a result,
the debt burden will
become more painful.
A contrarian plunge into
emerging markets
looks problematic
PAGE 9
NEWS
for around 50m employees,
was expected to allocate
around 5 per cent of its assets
to equities.
C Mediobanca will buy a
controlling share in Cairn
Capital, the London credit
manager that is currently
partly owned by the Royal
Bank of Scotland.
C TIAA-
CREF, the
US financial
services
provider,
has
raised
$3bn for
a new global
agriculture fund, exceeding its
initial fundraising target of
$2.5bn. This comes at a time
when many investors have
been scaling back their
allocations to commodity
markets. The fund has
commitments from 20
investors including Sweden’s
AP2, the Greater Manchester
Pension Fund and New Mexico
State Investment Council.
TIAA-CREF manages around
$8bn in farmland assets.
C Hedge funds made a fast
buck at the taxpayer’s expense
last week by betting against
Royal Bank of Scotland shares
shortly before the UK
government started selling its
stake in the bank. Sources said
some investors got wind the
government could be about to
start selling part of its 78 per
cent stake in the bank and
quickly placed a bet that this
would drive down the share
price.
C Bond giant Pimco is under
investigation by the Securities
and Exchange Commission.
The SEC has been examining
whether investors in Pimco’s
Total Return ETF were given a
misleading picture of the fund’s
performance. At issue is
whether it bought investments
at one price and then used an
artificially higher valuation
when subsequently calculating
the values of its holdings.
The specific conduct under
investigation is understood to
have occurred in the first four
months after the ETF was
launched in 2012. Bill Gross,
who was Pimco’s chief
investment officer at the time,
was among the executives
interviewed by the SEC.
C Aberdeen Asset
Management has bought
another alternative investment
company. The new buy, Arden
Asset Management, is a fund of
hedge funds. The purchase
follows Aberdeen’s acquisition
of Flag Capital in May, a private
equity manager.
C Axa Investment Managers
is putting a brave face on the
loss of €34bn, as money it
managed for Friends Life is
being transferred to Aviva
Investors.
“Following the purchase of
Friends Life by Aviva, we
expect €34bn of the €50bn we
manage on behalf of Friends
Life will transition to Aviva
Investors by the end of 2015,”
said Axa.
Axa said the withdrawal
would have a “limited negative
impact” on Axa IM’s underlying
earnings for 2016.
C India’s state pension fund,
the Employees’ Provident
Fund Organisation, surprised
some industry participants
after stating it would invest
just Rs50bn ($784m) in
equities in its first foray into
the stock market. The $133bn
fund, which provides pensions
The week
India’s state pension fund will invest just Rs50bn in equities
in its first foray into the stock market — Dreamstime
Bill Gross
best of the
We hope you enjoy reading this Best of the Financial Times. If you do and would like to receive some vouchers so you
can try out the FT at a discount, please visit ft.com/retail-voucher. Unfortunately this offer is only available in the UK.
ments, which must be held for at least
three years, they are deemed inappro-
priateforretailinvestors.
“As with any social investment, it is
not appropriate to think about this
fromafinancial-firstperspective,”says
Matt Robinson, head of strategy at Big
Society Capital “The primary motiva-
tionmustbesocialimpact.”
FT Money reporter Adam Palin
examinesthisgenerousnewtaxbreak,
and how it could be employed to sup-
portloftysocialandfinancialgoals.
beenheldbackbylowinvestmentlim-
its. With the Treasury’s application to
extend these thresholds pending EU
approval, and widely anticipated this
tax year, fund managers are now cir-
cling, evaluatingwhatwillqualify.
Residential care and rehabilitation
projects are among those tipped to
receiveaboost.
Despite its progressive ambitions,
SITR investments are likely to be the
preserveofthewealthy.Giventherisky
andilliquidnatureofqualifyinginvest-
enterprises has been raising capital at
an affordable price. For investors, the
risks have been deemed so high as to
considersuchinvestmentsasgifts.
Enter Social Investment Tax Relief
(SITR),thetaxbreakdesignedtomake
the sector more attractive. While the
challenge of measuring social returns
will remain, individuals will be largely
cushionedfromfinanciallossesarising
from projects in which they have cho-
sentoinvest.
In its first year, however, SITR has
R
eceived wisdom says phi-
lanthropy and financial
investments should be kept
well apart. Good intentions
and sober investment deci-
sionsshouldnotmix.
Socialenterprisesworktodispelthis
view,andtheUKgovernmentwantsto
help charities and community organi-
sations play a greater role in the deliv-
ery of public services as it steps back
fromprovidingthemitself.
The historic challenge for social
FINANCIALTIMES|SaturdayAugust8 /SundayAugust92015
Squirelled away
Merryn Somerset
Webb on why
charity costs
taxpayers billions
PAGE 6
INSIDE
Green deal
Renewable trusts set to
face subsidy reduction
in government cuts
PAGE 3
Court result
Victory for watchdogs
on high-risk collective
investments
PAGE 5
Pensions: the next PPI?
Why IFAs are reluctant
to give advice on the
new freedoms
PAGE 7
Maike Currie
Liquidity is the risk that
income investors should
watch out for
PAGE 7
Your questions
The tricky job of
obtaining a value for
purposes of sale
PAGE 11
How to . . .
Let out your house
when you move abroad.
John Aglionby explains
BACK PAGE
Podcast
How to pick a letting
agent and tips for
income investors
FT.COM/MONEYSHOW
LONG-TERM CARE
COMMUNITY RENEWABLE ENERGY HELP FOR VULNERABLE CHILDREN
COMMUNITY SPORTSREHABILITATION PROJECTS
Photographs:
clockwise from
top left: Jack
Sullivan/Alamy;
Dreamstime; Getty
Images; iStock
Shrinking
state
Money
Should investors
fill the gap?
20 | FTMoney FINANCIAL TIMES Saturday 8 August 2015
How to ...
Let out your house when you move abroad
Many people’s fixation with the cen-
tral London property market is on
how to scramble on to its bottom
rung. For others, the consideration is
theopposite:namelywhethertocash
inandfleethecapital.John Aglionby
facedthesameproblem.
Leaving is not a simple decision. As
my family drove north in 1989 to
startanewlifeinaCumbrianvillage
after selling our home in Bayswater,
my father warned: “This is a one-
way ticket. We’ll never be able to
movebacktoLondon.”
Fastforward26yearsandmywife
andIfacedthequandaryofwhether
tojumpoffthecentralLondonprop-
erty ladder. We are moving to Nai-
robifortheFinancialTimesandhad
todecidewhattodowithour2,000-
square-foothouseinFulham.Should
we sell or let it? Have London house
pricespeaked?Ifwesell,whatwould
wedowiththemoney?Butifwerent,
would the hassle be more than it’s
worth?
Our decision is one that faces not
onlyLondonersworkingabroad,but
couples marrying who both own a
home, those thinking of downsizing
orperhapsretiringtothecountry.
Housepricesinourareahavestag-
nated over the past six months and
even fell in the second quarter of
2015 amid fears of a “Mansion Tax”
and efforts by the government and
theBankofEnglandtocooltheprop-
erty market. But such short-term
gyrations that might prompt us to
sell could obscure longer-term
trends.
Ifthepriceofournext-doorneigh-
bour’s house, sold late last year for
£1.75m, is anything to go by, our
house has increased in value by
about40percentsinceweboughtin
mid-2011. We could now not afford
to buy in the street. And my father’s
words still ring in my ears. Since
1989, prices in central London have
risen on average by about 8 per cent
ayear.
Moreover, rents appear to be on
the rise. Whether it is the seemingly
never-ending tide of French
migrants or Brits starting to enjoy
thefeelgoodfactor,demandforfam-
ilyhomesinwestLondonappearsto
be buoyant. So we decided to let
ratherthantosell.
Ensuringourinsuranceandmort-
gage providers were happy with the
propertybeingconvertedfromown-
er-occupiertorentedwasnextonthe
to-dolist.Bothquicklycamebackin
the affirmative, although I did won-
der if the latter was because our
mortgagewaslessthan25percentof
thebank’svaluationofthehouse.
It is definitely possible to let and
manageapropertywithoutanagent,
even from thousands of miles away,
but we decided that it would proba-
bly be a false economy — and I don’t
want to be bothered by tenants fret-
ting about a skylight while trying to
avoid being kidnapped in Mogad-
ishu.
But who should we use? We were
not so keen on going with one of the
bighigh-streetagentsthathasahigh
turnover of staff, so we considered
two smaller, boutique-style outfits.
Foundthroughafriend’srecommen-
dation, we settled on Berkeley Way,
set up by Alex Reeves and Sheena
Patelin2005.
Why?Theagentappearedasinter-
estedinourstreetanditsresidents—
with a view to finding a tenant that
wouldfeelcomfortable,andsohope-
fully stay for longer — as thinking
about potential short-term profit. It
did help that Berkeley Way thought
we should be able to secure up to
£1,300 a week, 30 per cent more
than the other agents, and agreed to
charge 12 per cent a year to let and
manage the house, several percent-
age points lower than many agents
charge.
Ownerswantingtolettheirhomes
need to be ready for some harsh
home truths about the quality of
theirpropertyandtheamount—and
cost — of work required to make it
“tenant ready”. Fortunately our
agent was largely complimentary; a
cracked floor tile, dripping tap and
leaky shower cubicle in a bathroom
wereamongthemostseriousissues.
Butwewerealsoadvisedtoredec-
orate the property from top to bot-
tomtogiveitthe“shinynew”feeling
tenants are after, and to make it
mucheasiertospotdamageinfuture
beyond the expected wear and tear.
Thiscostus nearly£6,000.
BerkeleyWayadvised“launching”
the property on the market in early
July — just as private schools are
breaking up and potential tenants
are starting to think about their
accommodation for the new school
year.
Deciding the rent was the next
issue. One house nearby, but 350
squarefootlarger,wasletinMayfor
£1,165 per week. Another, again
slightlylarger,wasonthemarketfor
£1,300.
Alextoldusthatinourimmediate
neighbourhood “it is worth noting
that there are not lots of houses
whichhaveachievedoverthe£1,000
perweekmarker”.“Aswehavequite
a long lead in, we do have the option
of testing the waters with a higher
price,then‘relaunching’ifwedecide
toreduceit,”sheadded.Sheadvised
putting it on the market for
£1,195-£1,250 a week and gauging
theresponseoverafortnight.
My wife and I decided we’d prefer
to secure a tenant quickly than be
greedy and potentially endure an
anxious wait. So we settled on an
askingpriceof£1,195aweek.
Thehousewentonthemarketona
Monday evening, Berkeley Way
received three inquiries on Tuesday
and conducted two viewings on
Wednesday. One couple put in an
offer that evening and after some
negotiating over the following 24
hourswesettledon£1,150perweek.
Itturnedoutthefamilyliveonlyone
street away and are having to move
becausetheirlandlordwantsposses-
sionofthehouse.
Judging by the response, we
appeared to have judged the market
just right. Ten serious inquiries on
the first day would have been a sure
sign of underpricing, we were told,
while no nibbles by the end of the
week would have indicated that we
werebeingtoogreedy.
So,fingerscrossed,we’vetickedor
are ticking all the necessary boxes.
Theelectricity,gasandotherutilities
still need to be sorted but that only
requiresacoupleofphonecalls.Let’s
hope the house is still standing in
threeyearswiththesamenumberof
rooms.
YourLondonhouse:tosellorrent?
Tax changes in the Budget mean
landlords will have to sacrifice a
greater share of rental profits in
future. By contrast, profit on selling
one’s primary residence is not liable
to capital gains tax — but that is
unlikely to be a sufficient incentive
for most people to jump off the
London property ladder.
Landlords can still claim tax relief
on mortgage interest — although
the Chancellor is reducing the
amount that can be claimed from
April 2017. And if the property is
owned by more than one person — a
married couple, for example — then
each person is entitled to claim the
tax free allowance, currently
£10,600. However, if one person is
foreign then they are unlikely to be
entitled to the same benefits if you
are moving abroad.
If the property is being let
furnished, landlords can offset 10
per cent of the rental income for
wear and tear — until 2016. Then,
under rules announced in the last
budget, you will have to claim for
actual replacement rather than an
automatic percentage.
All this takes for granted that you
are filing a UK tax return. You will
have to continue doing this when
overseas and even if the rental
income is less than the tax free
allowance. And if you are not filing a
tax return, you will have to start.
The tax position
New lease of life: redecorating secured a higher rent — Barbara Corsico
Lionel Barber,
Editor

Best of the FINANCIAL TIMES2 3Best of the FINANCIAL TIMES
Not happy Pharrell Williams
speaks out over copyright ruling
Exclusive interview
Entertainment
industry faces
litigation nightmare,
says huge-selling
star
MATTHEW GARRAHAN — NEW YORK
Is it possible to copyright a feel-
ing? Pharrell Williams says no,
acknowledging that his track
Blurred Lines was inspired by
MarvinGaye’sGottoGiveItUpbut
denying he infringed copyright.
Last week he and singer Robin
Thickewereorderedtopay$7.3m
damagestotheGayeestatebyaUS
court. In his first interview since
the verdict, the Grammy winner
toldtheFTthatthedecisioncould
beruinousforcreativeworkfrom
movies to fashion and design.
“There are songs that utilise
othermaterial,”hesaid.“Butuntil
now there hasn’t been copyright
infringement, which is why this
is so scary.”
Musician Pharrell Williams
has warned that the creative
industries are at risk of a wave
of copycat litigation following his
courtdefeatlastweek,whenajury
ruledthathis“BlurredLines”song
infringedthecopyrightofMarvin
Gaye’s “Got to Give It Up”.
A federal court in Los Angeles
ordered the songwriter and pro-
ducerandthesingerRobinThicke
to pay damages of $7.3m to the
Gayeestateafterstudyingthetwo
song but not the recording. Mr
Williams denied “Blurred Lines”
had broken any copyright rules.
“There was no infringement, ”he
said. “You can’t own feelings and
you can’t own emotions . . . [in
music] there are only the nota-
tions and the progression,” he
added, referring to musical com-
position. “Those were different.”
“BlurredLines”,releasedinthe
summer of 2013, was among the
biggesthitsofthatyear,generating
nearly $17 min profits, according
to court documents. The release
of the track came amid a string of
hitsforMrWilliamsthatincluded
“Happy”, his solo number one.
The Grammy winner has
received broad support from
the music industry. “It’s a very
peculiar decision because the
Ruling did not refer to the usual
“If we lose our
freedom to be
inspired, the
entertainment
industry will be
frozen in litigation”
‘Youcan’townfeelings
andyoucan’town
emotions’
subconsciously, but this can be a
disruptive decision,” he added.
“What film-maker couldn’t sue
another film-maker for making a
moviethatfeelslikeanotherone?
It’s deeply troubling.”
Anothermoviestudiochairman
pointed to the potential ramifica-
tions for the art world. “Think
aboutRoyLichtensteinandAndy
Warhol, who borrowed heavi-
ly from other sources,” he said.
“None of that stuff would exist.”
Mr Williams declined to com-
ment on whether he and Mr
Thicke would appeal against the
verdict. “We’re working out our
next steps right now,” he said.
But he was adamant that
taking inspiration from other
Sources was a key part of the
creative process.
Originally published 20.03.15
“When a US federal jury found this year
that Pharrell Williams’ “Blurred Lines” song
infringed the copyright of Marvin Gaye’s
“Got to Give It Up” the singer’s court defeat
did not immediately appear to be the
type of story that would be covered in the
Financial Times.
But on closer inspection the ruling
had clear implications for the creative
industries. I had briefly interviewed
Williams before when writing about Apple’s
$3bn purchase of Beats and thought his
views on the court’s decision would make
an interesting story.
I approached a contact that I knew had
worked with him and we were able to pin
down time to talk - in between filming the
US version of The Voice talent show, where
Williams was appearing as a judge.
It turned out that Williams had plenty
to say about the court defeat. Articulate
and thoughtful, he warned that the verdict
could trigger a wave of copycat lawsuits.
“The verdict handicaps any creator out
there who is making something that
might be inspired by something else,” he
told me. “This applies to fashion, music,
design . . . anything. If we lose our freedom
to be inspired we’re going to look up one
day and the entertainment industry as we
know it will be frozen in
litigation.”
The exclusive
interview with one of
the world’s biggest
music stars turned a
legal dispute about a
pop song into a front
page Financial
Times story.”
songs.Theverdictappearstoseta
legal precedent because although
the tracks have a similar sound
and feel they have different note
and chord sequences.
“The verdict handicaps any
creator out there who is making
something that might be inspired
by something else,” Mr Williams
toldtheFinancialTimesinhisfirst
interview since the ruling.
“Thisappliestofashion,music,
design . . . anything. If we lose our
freedomtobeinspired,we’regoing
to look up one day and the enter-
tainment industry as we know it
will be frozen in litigation. This is
about protecting the intellectual
rights of people who have ideas,
”Mr Williams said.
Lawyers acting for the Gaye
estate argued in court that
“Blurred Lines” copied elements
of “Got to Give It Up”. A music
expert called as a witness for the
prosecution testified that there
was a “constellation” of similar
elements in the song.
The Gaye family yesterday
filed a new injunction in court to
prevent the copying, distributing
andperformingof“BlurredLines”.
“With the digital age upon us, the
threat of greater infringement
loomsforeveryartist,”thefamily
said in a statement.
The Gaye estate owns the cop-
yright to the “Got to Give It Up”
Marvin Gaye pictured in Los
Angeles in 1973
heisagoodfather,”saysonefamily
friend, recalling a phone call Mr
Tsipras took while in Italy, where
she fretted about paying the
family electricity bill. “Betty is
a woman of principle and a very
strong character, and I think that
part of Alexis’ success in dealing
with all this pressure is that Betty
is holding firm.”
Mr Tsipras’s tenure as prime
minister has defied the image of
a moderate, pragmatic, even if
calculating, politician who rose
to prominence solely on the basis
of charm and good looks. His first
public event on assuming office
was to lay flowers at a memorial
to Communist resistance fighters
executed by Nazi occupiers, one
of his many allusions to wartime
hostilities between his nation and
Germany, seen by many Greeks
as their chief tormentor. His
fiery rhetoric is compared by one
senior EU official, only half-jok-
ingly, to that of the late Venezue-
lan president Hugo Chávez.
For months, eurozone officials
assumed Mr Tsipras was simply
attempting to maximise conces-
sions before he struck a deal.
But some now believe the brink-
manship has always been a way
to exit the binding constraints of
the euro while blaming European
authorities if Grexit goes wrong.
By the time Mr Tsipras flew
to Brussels for eleventh-hour
negotiations two weeks ago with
the heads of Greece’s trio of bail-
out monitors, he had delivered
public insults to all three. Now,
he must convince them to trust
him with at least €70bn more of
their money — or lead his country
crashing out of the eurozone.
Originally published 11.07.15
‘If you don’t
have the feeling
of winning
— if you have
the feeling of
defeat — it’s
very difficult to
fight again’
infringements that artists can
be sued over, such as the writing
of the song or the writing of the
track,” said Paul McGuinness,
the former manager of U2. “The
award seems to have been made
on the mood of the song, which is
extraordinary.”
The jury’s verdict has prompt-
ed concerns beyond music. The
Oscar-winning movie producer
Harvey Weinstein said Holly-
woodcouldalsobeaffectedbythe
“Blurred Lines” precedent.
“I’m very concerned about the
notion that feeling or having a
piece of art that feels like some-
thing else can be infringement,”
said Mr Weinstein, whose epony-
mouscompanyhasreleasedfilms
rangingfromTheKing’sSpeechto
The Imitation Game.
“Everyone quotes things, even
Getty images
MATTHEW GARRAHAN
news
The FT brings a uniquely global perspective to news coverage, from
the Greek debt crisis to landmark legal decisions that impact business.
Our network of correspondents provides detailed reporting and
essential analysis of major world events and trends.
The FT has led the way in reporting the Greek debt crisis, the most
serious challenge to the euro since the single currency was launched in
1999. Our network of correspondents, led by Brussels bureau chief Peter
Spiegel, provide detailed daily coverage of the dramatic struggle by
Europe’s leaders to overcome the crisis and put the eurozone back
on a firm footing.
Throughout the crisis, there have been some strong characters involved in the story. In this piece, Peter
Spiegel explains more about the man at the centre of the story, Alexis Tsipras
World Markets
STOCK MARKETS
Jul 10 Jul 3 %Week
S&P 500 2076.62 2076.78 -0.01
Nasdaq Composite 4997.70 5009.21 -0.23
Dow Jones Ind 17760.41 17730.11 0.17
FTSEurofirst 300 1543.01 1518.35 1.62
Euro Stoxx 50 3528.81 3441.76 2.53
FTSE 100 6673.38 6585.78 1.33
FTSE All-Share 3635.55 3602.47 0.92
CAC 40 4903.07 4808.22 1.97
Xetra Dax 11315.63 11058.39 2.33
Nikkei 19779.83 20522.50 -3.62
Hang Seng 24901.28 26282.32 -5.25
FTSE All World $ 279.28 280.56 -0.46
CURRENCIES
Jul 10 Jul 3
$ per € 1.117 1.110
$ per £ 1.551 1.560
£ per € 0.720 0.711
¥ per $ 122.685 122.725
¥ per £ 190.283 191.489
€ index 85.636 85.614
SFr per € 1.049 1.045
Jul 10 Jul 3
€ per $ 0.895 0.901
£ per $ 0.645 0.641
€ per £ 1.388 1.406
¥ per € 137.077 136.231
£ index 92.012 93.059
$ index 103.110 102.720
SFr per £ 1.456 1.469
COMMODITIES
Jul 10 Jul 3 %Week
Oil WTI $ 52.83 55.68 -5.12
Oil Brent $ 58.72 60.55 -3.02
Gold $ 1159.30 1167.95 -0.74
INTEREST RATES
price yield chg
US Gov 10 yr 97.77 2.38 0.06
UK Gov 10 yr 98.17 2.21 0.12
Ger Gov 10 yr 96.41 0.90 0.17
Jpn Gov 10 yr 99.72 0.43 -0.02
US Gov 30 yr 96.45 3.19 0.07
Ger Gov 2 yr 101.08 -0.14 0.00
price prev chg
Fed Funds Eff 0.12 0.11 0.01
US 3m Bills 0.02 0.02 0.00
Euro Libor 3m -0.01 -0.01 0.00
UK 3m 0.58 0.58 0.00
MILES JOHNSON
— HEDGE FUND CORRESPONDENT
Hedge fund Brevan Howard is moving
someofitsmostseniortradersbackto
LondonfromGeneva,reversingahigh-
profile decision to leave the UK and
bucking concerns that the City’s status
as Europe’s leading hub for the indus-
trywasunderthreat.
The decision comes as several other
large hedge funds are also planning to
expand or launch in the British capital,
in a sign that international investors
continuetogravitatetoLondon.
Hedge fund managers and investors
argue that low tax rates have failed to
win over traders to the merits of life in
Switzerland, with many leaving their
familiesbehindinLondon.
Brevan Howard’s UK-born co-
founder Alan Howard led the charge by
moving to Geneva in 2010, in the wake
oftheintroductionoftighterEUregula-
tion of hedge funds. More than half of
his staff and most of his senior traders
followedhimwithinthreeyears.
But the $27bn hedge fund has started
to brief investors that it plans to move
some fund managers back to London,
people familiar with the group said.
BrevanHowarddeclinedtocomment.
The departure from London to
GenevaofMrHowardaswellasMichael
Platt, head of British hedge fund
BlueCrest, had prompted some in the
industrytofretthatLondonwouldstart
to haemorrhage billionaire traders to
thecantonsofSwitzerland.
While Mr Howard remained in
Geneva, Mr Platt last year relocated to
Jersey.
“TheythinkitwillbefineleavingLon-
don, and that they can come back and
visitallthetimeandthatthefamilywill
adjust,” said one big investor in hedge
funds. “A lot of these traders have just
gotquitebored.”
London’s hedge fund industry is
expandingasUSmanagershireemploy-
eesandlaunchnewfunds.
StevenCohen,whoclosedhisLondon
office after his then-named SAC Capital
admittedinsidertradingin2013,iscon-
sideringreturningtotheCity,according
toanemailsenttoitsstaff.
Chris Rokos, a former star trader at
Brevan Howard, is in the process of
launching what is expected to be one of
the largest new hedge funds in Europe
sincethefinancialcrisis.
Other new launches include Everett
Capital Advisors, being launched by an
ex-employeeofthehedgefundTaconic,
and another fund is being set up by
tradersfromQVT.
BrevanHowardbeginsUKreturnas
hedgefundtraderstireofSwisslife
No: 38,904 ★
9 7 7 0 3 0 7 1 7 6 5 1 7
2 9
The BBC is facing the second part of a
bruising funding battle this week, as
ministers prepare a ‘root-and-branch’
review of the broadcaster. The culture
secretary will look at whether the BBC
should air fewer popular
entertainment shows, do more to
ensure its impartiality, and be subject
to greater oversight from Ofcom. The
issues will be addressed in a green
paper to be published on Thursday.
Report i PAGE 4
BBC pressed by review as
funding battle heats up
Briefing
i Cameron orders more Isis missions
David Cameron, prime minister, has told defence
chiefs to escalate SAS and drone missions against
Isis,afterthegovernment’ssurprisecommitmentto
boostmilitaryspending.— PAGE 2
i China cracks down on margin lending
China is targeting identity fraud and grey-market
margin lending in the latest of a series of aggressive
measures to arrest the slide in the country’s stock
markets.— PAGE 8; TRADING TURMOIL, PAGE 17
i Renzi shakes up Italy’s justice system
The government of Matteo Renzi hopes
that its court-reform campaign will
speed up Italy’s trials and also help
woo foreign investors who have been
wary of the country’s convoluted
justice system.— PAGE 8
i Reddit reassures after ousting of chief
Anarchic discussion website Reddit has assured the
volunteers who help run it that it is in no hurry to
turn a big profit from their work, after 10 days of
tumultthatsawtheoustingofitshead.— PAGE 18
i Barclays eyes purchase to split off unit
Barclaysisconsideringanacquisitionasthequickest
way to gain the extra licence it needs to hive off its
retailbankundernewrulesforcingbigUKlendersto
splitintwo.— PAGE 17; INSIDE BUSINESS, PAGE 18
i Pharma blockbusters fire up sector
The launch of multibillion-dollar medicines has
boosted the pharma industry by helping to offset
patent expiries, but productivity is still being
depressed by high costs.— PAGE 19
i Councils need £1bn extra for living wage
Cash-strapped local authorities will have to find
more than £1bn extra by 2020 to pay for the new
nationallivingwage,accordingtoananalysisbythe
LocalGovernmentAssociation.— PAGE 3
Chinese stock market
Source: Bloomberg
Jul 2014 Jul2015
50
100
150
200
250
300
350
2
3
4
5
Margin debt
($bn)
Shanghai Composite
index (’000)
Datawatch
MONDAY 13 JULY 2015 WORLD BUSINESS NEWSPAPER UK £2.50 Channel Islands £2.80; Republic of Ireland €3.00
Tel: 0800 298 4708
Chinese investors
have been
borrowing heavily to
invest in the stock
market; margin debt
peaked at $366bn in
mid-June. High
levels of margin
debt can mean
sharper falls in share
prices as brokers are
forced to sell to
meet margin calls.
Passports for sale
The lure of visa-free travel and
special tax rules — WORLD, PAGE 8
A cunning coup
Barclays’ skilful skillset sacking
— LUCY KELLAWAY, PAGE 14
It’s time to be bold
World must face up to financial dramas,
says Lawrence Summers — PAGE 11
STEFAN WAGSTYL, DUNCAN ROBINSON
AND ANNE-SYLVAINE CHASSANY
— BRUSSELS
Germanylastnightheightenedthepres-
sure on Greece to implement bolder
economic reforms in order to secure its
place in the eurozone, despite attempts
byFrancetobrokeracompromise.
Fraught negotiations in Brussels over
a€86bnbailoutpackageattheweekend
created fresh uncertainty for Athens’
futureinEurope’smonetaryunionafter
finance ministers failed to agree a way
out of the biggest crisis to face Europe
since2012.
A fragile compromise was emerging
late last night under which Athens
would be forced to pass tough new
reform laws, including on pensions, by
Wednesday and prepare further rapid
reforms that the radical Greek premier
AlexisTsiprashaduntilnowresisted.
But it was unclear whether this deal
couldbeimplementedintimetosatisfy
German chancellor Angela Merkel and
other critics, lead to real negotiations —
or forestall Greece’s financial collapse.
Ms Merkel had said that the weekend’s
talkswouldbe“decisive”.
French president François Hollande
pledged to reach an agreement and
warned that at stake was not just
whether Greece stayed in Europe but
“ourconceptionofEurope”.
But a grim Ms Merkel said: “There’s
not going to be an agreement at any
cost.” Eurozone leaders, she added,
were considering “nothing more and
nothingless”thanthepreconditionsfor
aGreecerescuebyEurope’sbailoutfund
— a stance that appeared to cast doubt
on whether a full accord could soon be
reached.
The Franco-German impasse threat-
ened to strain Ms Merkel and Mr Hol-
lande’s recent efforts tobolster the EU’s
keypoliticalalliance.Atonepoint,argu-
mentsgotsoheatedthatoneparticipant
described the atmosphere among
financeministersas“violent”.
However, the two leaders’ comments
also left room for manoeuvre, perhaps
allowing a conditional deal that would
pavethewaytobailoutnegotiationsthis
weekifGreecedeliversonthepromised
reformlegislation.
Highlightingthedrama,Luxembourg
has warned Germany that pressing for
Grexit would bring “a profound con-
flict” with France and “catastrophe for
Europe”.Jean-ClaudeJuncker,thepresi-
dent of the European Commission who
last week admitted that the EU’s execu-
tivearmhadbeenworkingona“Grexit”
plan,said:“Iwillfightuntiltheverylast
millisecond to have a deal and I hope
therewillbeadeal.”
The delay is testing the European
Central Bank’s capacity to keep provid-
ing Greek banks with emergency
finance.Withoutprogressinyesterday’s
talks, the ECB would find it difficult to
maintain crucial support. Rescue costs
have risen to €82bn-€86bn, according
to a eurogroup finance ministers’ draft
statement, including €12bn needed in
the next month and €10bn “immedi-
ately”forbankrecapitalisation.
Arriving in Brussels, Mr Tsipras said:
“I am here ready for a compromise. We
owe that to the people of Europe who
wantEuropeunitedandnotdivided.”
Germany exerted maximum pres-
sure, with the finance ministry raising
the possibility of a five-year timeout
from the eurozone for Greece, and
transferring €50bn of assets to an
“externalfund”forprivatisationtohelp
fund debt repayment. Among Ger-
many’s staunchest allies is Finland,
where the populist Finns party threat-
ened to resign from their coalition gov-
ernmentifaGreekbailoutwentahead.
Greece turmoil page 6
Lawrence Summers page 11
Greece’seurozonefutureuncertain
asGermanystepsuppressure
3Fraught Brussels talks over €86bn bailout 3France struggles to broker compromise
Greece’s prime
minister Alexis
Tsipras talks to
Angela Merkel
and François
Hollande at
the start of
yesterday’s
summit meeting
— Olivier Hoslet/Epa
Jean-Claude Juncker,
European Commission
president, said: ‘I will
fight until the very
last millisecond to
have a deal’
JULY 13 2015 Section:FrontBack Time: 12/7/2015 - 21:14 User: piggotta Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
The leader taking Greece to the brink
Person in the news | Alexis Tsipras
In a volatile six-month
stand-off, a man once
known as pragmatic
has cemented a
reputation as a
hardliner writes
Peter Spiegel
mong the detri-
tus of a political
career that began
more than 25 years
ago is a newspaper
interviewthatAlex-
is Tsipras gave in 1990. He was
under attack by fellow radical
school pupils for striking a deal
with Greece’s centre-left gov-
ernment to roll back education
reformsthatslashedbenefitssuch
as free textbooks and made uni-
forms mandatory.
Most of his colleagues cared
more about expressing their
discontentment than achieving
their ostensible aims; but not Mr
Tsipras. The students were on
strike to protest against the new
education law; once it was with-
drawn, the strike should end, he
reasoned. “If you start a struggle,
it’s very important to know when
to stop,” Mr Tsipras, then just a
teenager, recalls saying.
In the run-up to the January
vote that made him prime minis-
ter, Mr Tsipras said that rereading
the article he was “surprised” at
his youthful levelheadedness. “It’s
very important to stop when you
have the feeling you’ve won,” he
said, sitting in the headquarters
of his far-left Syriza party. “If you
don’t have the feeling of winning
— if you have the feeling of defeat
— it’s very difficult to fight again.”
Just a week ago, amid deliri-
um in Athens’ central Syntagma
Square, there seemed no doubt
that Mr Tsipras was on the win-
ning side of his stand-off with his
country’sbailoutcreditors.Invast
numbers — far more than voted
him into office — Greeks agreed
he should reject the offer made
to him on the eve of the bailout’s
June 30 expiry. Yet at a summit
thisweek,eurozoneleadersmade
cleartheywouldofferfinancialaid
and preventaeurozoneexit onlyif
heagreedtoeventougherreforms
thanhadbeenonthetablebefore.
Whetherhecanstillsalvageavic-
tory is up in the air.
Atthestartofthepresentchap-
ter of the five-year-old Greek
crisis, many who negotiated with
the prime minister found him
engaging and pragmatic, coming
away convinced he was a man
they could do business with. In
recent weeks, that has changed.
Every time a deal looked closer,
one senior eurozone official says,
Mr Tsipras would huddle with
aides. Things they thought had
been agreed would then unravel,
leading many to believe he had
become captive to those around
him. “They [creditors] had just
become tired, eventually, of his
fickleness,” said the official.
Eurozone leaders had reason
to believe he was a dealmaker.
Although Syriza has its roots in
Greece’s Communist party, Mr
Tsipras’s rise to its leadership
came at the expense of older,
more hardline elements of its
founding generation, including
Alekos Alavanos, his predeces-
sor and longtime champion,
forced out by Mr Tsipras in 2008.
Allies insist Mr Tsipras is a man
of strong principles. But they
acknowledgehisgreateststrength
is not ideological purity so much
as an ability to find compromise.
UnlikemanyonEurope’sfarleft,
MrTsiprasdoesnotcomefromthe
labour movement or a particular-
ly radical family. His father, who
ranasmallconstructioncompany,
voted regularly for Pasok, the tra-
ditional centre-left party.
Mr Tsipras was planning a
career much like his father’s —
until, as an obscure 32-year-old
civil engineer, he took 11 per cent
of the vote in Athens’ 2006 may-
oralelections,catapultinghimself
to stardom. “He was young, he
was a new face in politics,” says
Dimitris Tzanakopoulos, a Syriza
adviser who first met Mr Tsipras
whenhewas18andbothwerestu-
dent activists. “It was something
really radical for Greece back
then to have a 32-year-old guy
running for mayor.”
People close to him say his
publicity-shy partner, Betty, a
school days sweetheart with a
doctorate in engineering, keeps
him grounded. Even as Mr Tsip-
ras became presumptive prime
minister-in-waiting after Syriza
stunned the political classes by
finishing second in two mid-
2012 parliamentary elections
— held at the darkest point of
the intensifying eurozone crisis
— she insisted he walk his two
young children to school in their
working-class central Athens
neighbourhood.
“Bettyisverystrictindemanding
A
Peter Spiegel has become an
indispensable source for those
following the Greek saga. With
his unrivalled contacts and deep
knowledge, Peter provides a
unique supply of exclusive news
and analysis for FT readers.
Stefan Wagstyl has the inside
track from Berlin, where Angela
Merkel’s government holds the
key to most of the big decisions
facing EU leaders.
Kerin Hope is a veteran Athens
correspondent, sharing her
unmatched experience and
understanding of Greek politics
and the Greek economy with FT
readers.
Three of our top correspondents covering Greece:
World Markets
STOCK MARKETS
Jul 13 prev %chg
S&P 500 2095.90 2076.62 0.93
Nasdaq Composite 5063.92 4997.70 1.32
Dow Jones Ind 17956.53 17760.41 1.10
FTSEurofirst 300 1572.05 1543.01 1.88
Euro Stoxx 50 3590.67 3528.81 1.75
FTSE 100 6737.95 6673.38 0.97
FTSE All-Share 3671.80 3635.55 1.00
CAC 40 4998.10 4903.07 1.94
Xetra Dax 11484.38 11315.63 1.49
Nikkei 20089.77 19779.83 1.57
Hang Seng 25224.01 24901.28 1.30
FTSE All World $ 281.64 279.28 0.85
CURRENCIES
Jul 13 prev
$ per € 1.101 1.117
$ per £ 1.553 1.551
£ per € 0.709 0.720
¥ per $ 123.455 122.685
¥ per £ 191.700 190.283
€ index 86.337 85.636
SFr per € 1.046 1.049
Jul 13 prev
€ per $ 0.908 0.895
£ per $ 0.644 0.645
€ per £ 1.410 1.388
¥ per € 135.931 137.077
£ index 92.123 92.012
$ index 102.959 103.110
SFr per £ 1.475 1.456
COMMODITIES
Jul 13 prev %chg
Oil WTI $ 52.80 52.74 0.11
Oil Brent $ 58.55 58.73 -0.31
Gold $ 1154.00 1159.30 -0.46
INTEREST RATES
price yield chg
US Gov 10 yr 97.37 2.43 0.04
UK Gov 10 yr 97.83 2.24 0.04
Ger Gov 10 yr 96.75 0.86 -0.04
Jpn Gov 10 yr 99.62 0.45 0.01
US Gov 30 yr 96.14 3.20 0.02
Ger Gov 2 yr 101.24 -0.19 0.00
price prev chg
Fed Funds Eff 0.12 0.11 0.01
US 3m Bills 0.03 0.02 0.01
Euro Libor 3m -0.01 -0.01 0.00
UK 3m 0.58 0.58 0.00
No: 38,905 ★
9 7 7 0 3 0 7 1 7 6 5 2 4
2 9
David Cameron’s decision to send
three Chinook helicopters to help the
Nepal earthquake relief effort cost the
UK taxpayer about £3m, even though
the aircraft were never used. The
prime minister sent out a tweet on
April 26 announcing that the Royal Air
Force would be sent to help, but when
the Chinooks arrived the Nepalese
government refused to let them enter
the country.
Reporti PAGE 4
Unused Nepal helicopters
cost UK taxpayer £3m
TUESDAY 14 JULY 2015
Briefing
i Deutsche Bank ‘bribe’ attempt probed
Deutsche Bank has been asked by a US regulator to
give details of a suspected attempt to bribe a
Moscow employee who was asked to resume trades
that may have breached laundering rules.— PAGE 17
i Arts groups make case for investment
Publicly funded arts groups are a “seed bed” for
growth in the commercial creative sector, fuelling
the argument for state investment before the
autumnspendingreview,artsleaderssaid.— PAGE 6
i Nintendo death comes at key juncture
The death of Nintendo chief executive
Satoru Iwata comes at a critical time
as the group behind the Super Mario
franchise experiments with the
mobile gaming market, breaking
from its consoles-only strategy.— PAGE 20
i Study busts China investment myths
A report into China’s stocks found that big players
are far more crucial to market swings than moms-
and-pops.— PAGE 10; EQUITIES, PAGE 30; INSIGHT, PAGE 32
i Clinton pledges to tackle risk-taking
Hillary Clinton pledged to curb Wall Street risk-
taking, in a speech that put a progressive agenda at
the core of her presidential campaign.— PAGE 8
i Foxconn seeks to build in India
Taiwan’s Foxconn plans a manufacturing push in
India,buildingupto12newfactoriesandemploying
asmanyas1mworkersby2020.— PAGE 17
i NPS plays pivotal role in Samsung deal
South Korea’s $422bn National Pension Service is
poised to make a vote that could swing the fate of a
large merger in the Samsung group.— PAGE 18
i Wave of hedging deals in oil expected
Smaller oil groups in US shale may have no choice
but to accept low lock-ins, which means a wave of
hedging deals could hit markets this year.— PAGE 30
Datawatch
WORLD BUSINESS NEWSPAPER UK £2.50 Channel Islands £2.80; Republic of Ireland €3.00
Tel: 0800 298 4708
Sources: Eurostat; HM Treasury
% of EU average
0 100 200 300
Spain
Italy
France
UK
Belgium
Sweden
Netherlands
Range of GDP per inhabitant
Capital city area National average
Germany
Range of GDP per person
across regions in EU countries
London dominates
the UK economy
to an extent not
seen in other large
EU nations,
accounting for
over a fifth of UK
GDP, compared
with Berlin’s 5 per
cent of German
national income.
BARNEY JOPSON — WASHINGTON
JOE RENNISON — NEW YORK
High-frequency traders could face a
waveofnewregulationafterUSauthor-
ities called for a broad review of the
rules that govern them following a
burst of volatility that shook faith in
markets’resilience.
In a long-anticipated report on the wild
swing in bond yields on October 15 last
year, the US Treasury department and
regulators said that the growth of rapid
electronic trading had played a central
role but stressed that several other
factors also contributed. Yields see-
sawedover12minutesasliquiditydried
up, sparking fears over the underlying
fragility of the $12tn US Treasury mar-
ket that is the bedrock of the global
financialsystem.
The report said that a wholesale
review of automated trading rules was
“worthwhile”,asithighlightedessential
changesinmarketfunctioningthatsug-
gesttheepisodewasnotaone-off.
“The introduction and rapid growth
of automation in the US Treasury mar-
ket over the past decade has brought
benefits as well as challenges to trading
practices and risk and internal control
systems,”itsaid.
The report noted that automated
tradingcanoccuratspeedsthat“exceed
the capacity of manual detection and
intervention, posing a challenge to tra-
ditionalriskmanagementprotocols”.
Non-banks that rely heavily on auto-
mated trading now account for 60 per
cent of institutional trading in the bond
markets, up from 25 per cent in 2008,
according to Anthony Perrotta, global
headofresearchatTabbGroup.
The report called for the considera-
tion of new registration requirements
for traders and enhanced risk manage-
ment rules. But officials said they had
notyetdecidedwhethertougherregula-
tionwasneeded.
The report is likely to heighten ten-
sions between bond dealers and the US
authorities because it did not pin any
blame on the Dodd-Frank post-crisis
reforms, which some market partici-
pants say have reduced liquidity by
encouraging banks to stop acting as
marketmakers.
The stability of the US Treasury mar-
ket has global implications because it is
a benchmark for borrowing costs and
assetpricesaroundtheworld.
TheOctoberepisodesparkedafinan-
cial “whodunnit” as investors, traders
and regulators sought to understand
whathadhappened.
No smoking gun page 32
USreportintoOctoberbondmeltdown
callsforreviewofautomatedtrading
Strange ‘victory’
It is Germany that has retreated,
not Greece — GIDEON RACHMAN, PAGE 13
Slack time
The office-messaging tool that
is growing like a weed — PAGE 14
Tax demand
Apple, Starbucks and Amazon in
the EU’s line of fire— BIG READ, PAGE 11
PETER SPIEGEL AND
STEFAN WAGSTYL — BRUSSELS
HENRY FOY — ATHENS
Greek prime minister Alexis Tsipras
returned to Athens yesterday facing a
rebellion within his government after
he accepted the most intrusive pro-
grammeevermountedbytheEUasthe
price for a new €86bn bailout to keep
Greeceintheeurozone.
Mr Tsipras was set to rely on opposi-
tionsupporttopassaswathofeconomic
reform measures by tomorrow’s EU-
imposeddeadlineorfacebankruptcy,as
agrowingnumberoffar-leftMPsvoiced
opposition to the deal, Greece’s third
bailout in five years. The ruling Syriza
party’s extremist Left Platform called it
a“humiliationofGreece”.
The leader of the Independent
Greeks, the rightwing coalition partner,
alsosaidthathispartycouldnotagreeto
the accord, calling it a “coup by Ger-
many”anditshardlineeurozoneallies.
Theagreementeasedthegreatestcri-
sis facing the EU and its eurozone core,
fendingoffatleastfornowGreece’sexit
fromthesinglecurrency.
But the deal was reached only after a
fraught 17-hour summit of eurozone
leaders that pitched Mr Tsipras against
GermanchancellorAngelaMerkel.Offi-
cials said that “Grexit” appeared immi-
nent near 6am on Monday, when both
prepared to walk away from talks, con-
vincedthatnodealwaspossible.
Instead,theyagreedtermsthatadip-
lomat from one German-allied country
likened to turning Greece into an eco-
nomic protectorate, including a plan to
place the country’s most valuable pub-
licly owned assets into a €50bn privati-
sationfundsupervisedbytheEU.
Mr Tsipras accepted plans for a high
level of domestic economic supervision
by the bailout monitors, including the
IMF, and a public administration
revampoverseenbyBrussels.
He must also implement a list of eco-
nomic pledges — including an overhaul
of the country’s value added tax system
and sweeping pension reforms — by
tomorrow as a precondition for formal
negotiations this week on a financing
package to stave off the bankruptcy of
thefast-deterioratingeconomy.
MsMerkelsaidthatonceGreecetook
stepstolegislatereformstherewouldbe
an agreement that she could “recom-
mend with full conviction” to the Ger-
man parliament. French president
François Hollande said: “At some point
we thought we might lose a member of
the eurozone; but Europe would have
retreated,weneededtosucceed.”
Investorswelcomedtheaccord,push-
ingstocksinEuropeupnearly2percent
but there was no euphoria, reflecting
thepoliticalobstaclesthatstilllieahead,
notleastinAthens.
Greek political leaders said the legis-
lationwasnotatriskoffailingbecauseit
haswidesupportofmainstreamopposi-
tionlawmakers.
But the insurrection called into ques-
tion how long Mr Tsipras could survive
as prime minister. One EU official said
that eurozone ministers were likely to
wait to see if he survives tomorrow’s
vote before finalising a €7bn bridge-
financing deal needed so Athens does
notdefaultonabondowedtotheEuro-
peanCentralBanknextMonday.
Greece deal pages 2 & 3
Osborne rejects funding calls page 6
Editorial Comment & Letters page 12
Comment page 13
Lex page 16; Markets pages 30 & 31
TsiprasfacesrebellioninAthens
afteraccepting€86bnEUbailout
3Premier likely to rely on opposition 3Greece an economic protectorate, says official
Alexis Tsipras,
Greece’s prime
minister, talks
to the press after
the eurozone
leaders’ meeting
in Brussels
yesterday— Laurent
Dubrule/Epa
Third time lucky?
€73bn
MAY 2010
Amount disbursed from original
€110bn agreed
€159bn
FEBRUARY 2012
Sum paid out of €172bn pledged,
including rollover from 1st bailout
€86bn
JULY 2015
Proposed in return for speedy
implementation of reforms
JULY 14 2015 Section:FrontBack Time: 13/7/2015 - 21:16 User: dawkinsj Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
Joe Cummings

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