Abigail with attitude: The lost art of banking


Abigail Hofman
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Bob Wigley, a former chairman of Merrill Lynch EMEA, might also appreciate a large tumbler of Scotch. Wigley, who left the US investment bank after it was devoured by Bank of America in 2009, became chairman of Hibu, the former Yellow Pages printed directory of local businesses, some four years ago.

Sadly, even Wigley proved unable to stem the tide of progress in the form of the internet. Hibu equity investors were wiped out this summer as Hibu shares became worthless when lenders took over the company.

Wigley, of course, has an impressive curriculum vitae – didn’t he used to sit on the Court of the Bank of England between 2006 and 2009? So his current travails in the ‘real world’ are probably a ‘blip’. And indeed the Financial Times reported in late July that Brave Bob is hoping to launch an exotic derivatives platform, NetOTC, and a bank called First Global Trust.

Musing on Bob led me to realize that I hadn’t heard from his successor, Jonathan Moulds, for ages. Moulds, who was president of BAML in Europe, left his post in 2012 after a run-in with George Clooney look-alike Andrea Orcel. Orcel then bolted for UBS where he now runs the investment bank. If I recall correctly, Moulds, a charming individual and a genial host, is a big collector of Stradivarius violins.

Bankers and businessmen have traditionally been great patrons, using their wealth to collect beautiful and unique artefacts. My mind always wanders to the Frick collection. Housed in a magnificent mansion on Manhattan’s Fifth Avenue, the collection was assembled by the late-19th-century industrialist Henry Clay Frick.

Nevertheless, I was perplexed when one of the most senior European bankers remarked nonchalantly to me, shortly after Lehman went bust: "This all begs the question of how much art you should have on your walls compared to your overall net worth." The implication was that top bankers were big players in the art market partly for investment purposes, but mostly for bragging rights.

Senior banker’s words drifted back to me this summer when I heard a story about a hedge fund manager who had piled on debt to add to his impressive art collection as markets boomed in 2007, only to find himself caught up in a horrible death spiral in 2008 as the illiquid paintings sunk in value, his collateral withered and the lender began asking for its money back. Recently, bankers have been buying art again. And one investment banker purred to me that he employed two curators to advise on and nurture his valuable collection.

Debt remains ridiculously cheap. No one wants to hold cash. The wealthy are seeking a unique store of value and perhaps they see the answer in collectables? I was however worried when, during the summer, a conservative corporate adviser told me that he had borrowed $1 million to invest in an equity fund that the year before had returned 30%.

"After all," mused the corporate financier, "if I can borrow at 3% and the investment returns even 15%, I’m doing pretty well." That is of course true. But it is also true that past investment returns are no guarantee of future investment returns. Might history be in danger of repeating itself?