This is an archived article. For the cover story concerning Sir Allen Stanford please click here.
Sir Allen’s new and innovative cricketing enterprise is merely the latest innings in a business empire that spans financial services to upmarket real estate development, hospitality and professional sports. We talked to the Sir Allen about his ability to keep investments on track, whether there’s a formula for making financing work, and his interest in cricket.
Wise investment decisions
Tireless research, meticulous planning and hard work have been the core principles of Stanford Financial Group’s success since the first Stanford enterprise was begun by Sir Allen’s grandfather in 1932. Like other investment firms Stanford Financial offers its clients diversified portfolios fine tuned to meet their financial objectives; near, mid and long-term. Where the firm differs, however, is in the way it measures performance.
“Certainly global diversification across asset classes, economic sectors and currencies is critical to the Stanford Investment Model (SIM) strategy, but we do not measure our performance against current market indices,” says Sir Allen. “Instead of benchmarking as most firms do, we set our own Return on Investment goals. Our SIM strategies are a fluid, therefore constantly evolving process guided by the parameters set by our investment committees. Our investment strategies have always been one of long-term consistency. The current market conditions we find ourselves in today are no exception.”
“We do not invest in anything that we do not fully understand, and often we don’t follow current trends when making investment decisions,” emphasises Sir Allen. “For example, the reason we had no exposure to the securitised debt meltdown was that after doing our own internal research and risk analysis we simply could not get our arms around the underlying assets and their associated risk, therefore any perceived profits became irrelevant.”
Sir Allen also points to the quality of the people working for Stanford Financial as instrumental in the firm’s performance. “A financial advisor who delivers true world class wealth management service to his clients must also be supported internally and externally by world class talent,” says Sir Allen. “At Stanford, that external support is provided by advisors and money managers with whom we have had, in some cases, relationships going back three decades. Internally over the years we have continuously invested considerable sums of money to grow our policy research, financial analyst, equity research and fixed income teams, in spite of current trends to outsource these disciplines.”
The internal Stanford team includes over 100 people constantly searching for opportunities across the globe in order to meet the firm’s ROI goals with palatable risk. As Sir Allen notes, the fact that the housing market in the United States is in distress, yet in Brazil new home construction is booming, shows how important it is to take a global approach to investment strategy, and to thoroughly understand the economies in each country that support the industries being invested in.
“The bottom line is this, there is no short cut to quality investing, or magic formula for making money, it is a process of discipline and hard work.” says Sir Allen.
You do not become a billionaire entrepreneur without having a good understanding of the global economy, and Sir Allen’s opinions on the regional economic prospects and possible investment opportunities for the future are well worth noting.
On the US economy, Sir Allen has concerns. “With a sluggish economic base, dependency on imported oil, tight credit, inability to substantially grow exports with a weak dollar and now commodity prices that are certain to bring on inflationary pressures, and a €0.6bn a day cost to fight the Iraq and Afghanistan wars; any economist will tell you that this scenario points towards stagflation,” he warns. “I hope that I am wrong and the US economy can weather these current storms, but the challenges are in a number of sectors that have been hit hard, and it will take some time for them to recover.”
In the emerging markets, however, Sir Allen sees a number of opportunities, although not necessarily where you might imagine. China, on its way to becoming an economic superpower, is perhaps overexposed, he says. “I am lukewarm for investing in China right now, if for no other reason than everyone else is already in China, the cost of living and wages are guaranteed to rise, and they have some serious environmental issues, which they will soon have to deal with.”
“India has created pockets of great wealth and great investment opportunities, but it is a volatile place for investing that will eat the ill-informed alive.” Says Sir Allen
He sees the Middle East and Africa as the last true emerging market with this observation. “This part of the world is definitely one where relationships determine your success and there is almost no correlation to the rest of the global economy from these oil exporting, enormously wealthy countries.”
Sir Allen is bullish on Russia, currently undergoing a transition from communist society to capitalism, (but with the added caveat that you need to do your homework), just as he is on Latin America, and Brazil in particular.
“Capital inflows have increased significantly in most Latin American countries over the past few years indicating a confidence and enthusiasm for a part of the world with enormous untapped natural resources and a burning desire to move up the economic and social ladder. Most governments are committed to investing in their countries’ infrastructure and the political risk of investing, at least in most countries, is acceptable,” says Sir Allen.
“Just look what a success story Brazil has become, for example. Back in the 1970’s no one took Brazil seriously, except in soccer. Today Brazil is South America’s largest economy, it is a true global player, and produces all of its energy needs internally. If the government can keep inflation in check and give as much attention to the environment and ecology of the country as it has to its economy, then Brazil has an incredibly bright future.”
There is a bright future ahead for the Stanford Financial Group too, according to Sir Allen. “In these turbulent and uncertain times, I see great opportunities for Stanford. I certainly wish that the current chaos and confusion in the markets could have been avoided, but there are great buying opportunities and huge opportunities to grow our business now,” he says. “We had no sub-prime exposure, were extremely conservative in our use of leverage, and our business model has proven highly efficient in the current market conditions.”
A new game
Despite his considerable business success, restless entrepreneur Sir Allen, shows no signs of letting up the pace, with a number of new enterprises on the go, or at the planning stage.
One well publicised venture is Sir Allen’s foray into the world of cricket, shaking up the sport with the relentless vigour of a man not used to failure. While Sir Allen’s commitment to the 20/20 form of the game, and the €12m prize for the winner of the England versus Stanford’s All Stars game on November 1, 2008, may have diehard traditionalists choking on their Pimms, there is no denying Sir Allen loves the game and wants to secure a successful future for it – regardless of format. He is also keen to revive the flagging fortunes of the West Indies national side.
“I looked very carefully at how we could take a sport that was dying in the Caribbean, bring it back to life and give it a future. In the process, we needed to change the entire cricket fan demographic from being male dominated to one that was family oriented and particularly exciting for young kids. The 20/20 format, no doubt about it, is the future of the sport,” says Sir Allen.
“As a point of reference the TV rights for the recently completed Indian Premier League were sold for €0.6bn. Our business model goal for the Stanford 20/20 is for our costs to be covered within three years through TV, sponsorship and other direct revenue streams. With the Stanford 20/20 Tournament, we firmly believe we have created something that will capture a huge global audience and promote the Stanford brand to new and exciting markets.”
On another front Sir Allen is planning something even more ambitious. “I am presently working on a series of projects within a project that is unequalled in the world. I have been working on this for over nine years with some of the world’s top architectural, engineering and design firms,” he says.
“Hopefully we are in the last phases of negotiations with government officials and I am optimistic it will all come to a positive conclusion very soon. This mega project will transform one island nation into a model for sustainable, ecologically correct development, while providing a foundation for future economic and social improvement for an entire population for generations to come.”
The sustainability focus is very apt. For there is one considerable cloud on the horizon, says Sir Allen.
“Poor global leadership, nuclear or biological war, man’s inhumanity to man, greed, religious intolerance, exponential growth of human enterprise… they are all overshadowed by global climate change,” he says. “I am not talking about saving planet earth. I’m talking about saving civilisation. For the next generation to have a future, we as nearly seven billion people living on a planet with finite resources, must immediately begin the process of restructuring the global economy before we reach the tipping point of massive market failure and the collapse of social, economic and government structure.”
And given his track record, there is little doubt that Sir Allen will play a significant role in tackling the challenge of global climate change, applying the same meticulous preparation, dynamic energy, and appetite for sheer hard work, that has made him such a successful businessman, to help knock this global threat for six.
For further information www.stanfordeagle.com