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Tom Buerkle
Institutional Investor
January 2008
In the euphoric aftermath of the collapse of communism and a swift victory in the Gulf War, the first President George Bush boldly proclaimed a new world order of economic and political liberalism, a vision that was as idealistic as it was hubristic. In the ensuing years, the U.S. reigned supreme around the globe militarily, culturally — and above all, economically and financially. Avatars of globalization, Wall Street’s giants spread the American gospel of stock ownership and easy credit to the far corners of the earth, while the U.S. Treasury — working hand in glove with the International Monetary Fund — enforced the Washington consensus of privatization, free trade and financial deregulation.
Today, that world seems hardly recognizable. U.S. influence has dissipated as a result of military action abroad and credit excesses at home, while the successes of globalization have shifted prosperity and economic power from the developed West to a wide swath of countries in Asia, the Middle East and Latin America.
These changes have manifested themselves with stunning rapidity lately in the world of finance, producing a historic shift in power perhaps best exemplified by events at Citigroup. The bank has long been a symbol of American financial might and ingenuity; its executive committee chairman, Robert Rubin, all but ruled the global economy as U.S. Treasury secretary in the 1990s, dictating the terms of the resolution of the Asian financial crisis. But facing write-downs of as much as $18 billion for its subprime exposure, Citi, and Rubin, were forced to go cap in hand to the Abu Dhabi Investment Authority (ADIA) for a $7.5 billion capital injection. How the mighty have fallen! Bear, Stearns & Co., Merrill Lynch & Co., Morgan Stanley, UBS — all have beaten similar paths to the developing world in search of capital.
To help make sense of these changes, we decided to compile a list of the most powerful and influential people in the world of finance today, what we are calling The Power 75. Yes, it’s our opinion; yes, it’s arbitrary; and yes, we think it reflects the dramatic shifts in the pecking order of global finance.
Heading the list, not surprisingly, is Ben Bernanke, the U.S. Federal Reserve Board chairman. American financial might may stand diminished, but Bernanke’s control of U.S. interest rates still affects the rate of growth, availability of credit and value of stocks, bonds and currencies in the U.S. and around the world.
Elsewhere, the top of this list looks dramatically different than it would have only a year ago. The new ascendant powers are led by China, whose massive reserves of nearly $1.5 trillion have given the country a clout its communist leaders could barely dream of a generation ago. As a consequence, Lou Jiwei, who as head of China Investment Corp. is spearheading the country’s efforts to invest that newfound wealth abroad, ranks second on our list. China’s liquidity tide has also fueled a stock market boom and transformed, seemingly overnight, Industrial and Commercial Bank of China into the world's biggest bank by market capitalization. ICBC’s chairman, Jiang Jianqing, is at No. 4, one place behind the untarnished king of Wall Street, Goldman Sachs Group chairman and CEO Lloyd Blankfein.
Money is power, of course, and our ranking reflects that fact with prominent places for the world’s sovereign wealth funds — as well as cash-rich Western investors like Warren Buffett and hedge fund magnate Kenneth Griffin. These players are using their money to extend their influence and buy major stakes in a raft of major financial institutions.
But power is about more than just money. Consider an activist investor like Eric Knight of Knight Vinke Asset Management. He controls less than one one-hundredth the amount of assets of ADIA, but by working with major investors like the California Public Employees’ Retirement System and waging carefully targeted campaigns, he has been able to force change at major companies such as Royal Dutch/Shell and Suez. Now he is taking on HSBC.
Like all such lists, this one is by nature subjective, and subject to change. It remains to be seen whose power will prove more long-lived: ICBC’s Jiang, who, notwithstanding his bank’s massive market cap, has little global presence to speak of, or Vikram Pandit, the untested new CEO of Citi, who inherits a humbled institution but one whose brand recognition and global reach remain enviable.
We hope our ranking proves thought-provoking and look forward to reviewing this power elite in the years to come.
71 Robert Bertram
Executive vice president of investments, Ontario Teachers’ Pension Plan
The first and only investment chief at Ontario Teachers’ Pension Plan, Canada’s biggest, Robert Bertram continues to chalk up an enviable record of performance and innovation. A former treasurer of Alberta phone company Telus Corp., Bertram, 63, has systematically reduced the fund’s equities exposure while plowing money into private equity, venture capital, infrastructure and real estate. He has also helped pioneer risk budgeting and liability-driven investing. Teachers’ has posted the best performance of any Canadian pension fund every year since its start in 1990, averaged an annual return of 11.8 percent and grown assets more than fivefold to C$106 billion ($107.1 billion).
“Material reprinted with permission from Institutional Investor.
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