Colombians riot over money lost in pyramid schemes

BOGOTA // Thousands of Colombians rioted around the country yesterday, demanding their money back after being defrauded in a series of pyramid schemes and then mocked in some cases by those who took their cash. In some of the nine cities where the protests erupted, police used batons and tear gas to subdue angry mobs. In recent months, a number of phoney loan companies have vanished along with millions of dollars in deposits after promising interest rates of up to 150 per cent. Regular savings accounts are unpopular in Colombia due to high banking fees.

'Dear investors, thanks for trusting us and depositing your money,' read a note posted on the door of a company in the southwestern province of Cauca after its owners disappeared. 'Now, for being stupid and believing in financial witchcraft, you will have to work for your money', it said, prompting depositors to storm the building, wreck the companys offices and loot its computer equipment and furniture.

Some left the scene bloodied after confronting the police. The president Alvaro Uribe called on Congress to pass a law that would penalise the swindlers and the vice president Francisco Santos warned people to avoid the schemes, which have mushroomed on promises of easy money. "When someone promises to double your money in six months they are trying to trick you", Mr Santos said. "Nothing is free in this world and that is not going to change."

Police arrested a group of loan managers as they tried to flee the central city of Pereira with four suitcases stuffed with cash. They were charged with bribery after offering money to the officers in exchange for their freedom. Pyramid scams are common in the developing world where many people have little financial sophistication. The collapse in 1997 of pyramid investment schemes in Albania produced losses of US$2 billion and led to anarchy until an Italian-led European force restored order.

Many Colombians are feeling squeezed as the world financial crisis weighs on the Andean countrys economy, which the central bank says may grow by only 1 per cent next year after a boom driven by record foreign direct investment. Uribe remains popular for driving leftist rebels back into the jungles after decades of fighting that once encroached on the countrys urban industrial areas. * Reuters

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Install an air filter in your home.

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Use unique usernames and passwords while enabling multi-factor authentication.
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Critically assess whether a project’s promises or returns seem too good to be true.
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THE LIGHT

Director: Tom Tykwer

Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger

Rating: 3/5

Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital