Prince Alwaleed bin Talal: Success is the 'ultimate kick'

His investment decisions move markets - but what drives Saudi Arabia's legendary financier? Christian Sylt meets the man behind the deals

Sunday 31 July 2005 00:00 BST
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But with the legend comes the mystery. Who is he? Did his fortune come from Saudi Arabia's oil wealth? How does he work his magic?

In truth there is a simplicity about Alwaleed: when he says he looks for investments that provide long-term returns, he means it. He is energetic and articulate, and his colourful character comes across in his wild gesticulations as he talks. His responses to questions are concise, to the point and delivered in rapid-fire bursts. Without hesitation he can recall detailed information about any of the companies he invests in.

"What drives me is success, results, performance and achievement," he says, adding that watching his shares go up gives him the "ultimate kick".

On his investment-hunting trips around the world, Alwaleed often visits tens of countries in a matter of days. He travels on one of his fleet of three Boeings, including a 747 fitted with wireless broadband. He and his entourage often work 24 hours a day. These are Alwaleed's "holidays".

"It is a myth that, to relax, a person has to be sunbathing and think of nothing. Forget it. I am against that. I am really against that," he stresses.

His schedule at home in Saudi Arabia is no less demanding: Alwaleed gets up at 10am after only five hours' sleep and works until midnight every day. He admits: "I have had drive for a long time."

Although he is a grandson of King Ibn Saud, the founder of modern Saudi Arabia, Alwaleed's immediate family never had the immense wealth enjoyed by many of his relations. Having become, at 14, the youngest man to join the Saudi military, he soon developed an interest in business, listening to the BBC news on the radio every day as well as reading political magazines and newspapers. In 1976 he enrolled on a business course at California's Menlo College; on returning, he was given a $30,000 loan from his father and a house that he mortgaged, raising around $400,000. In addition, as a Saudi prince, he was receiving an allowance of $15,000 a month.

Alwaleed used this money for property speculation and then invested in Saudi Arabia's poorly managed banks. "I always loved banking," he says. "Look at any country - what's the heart of the country? It's the economy. What's the heart of the economy? It's banking."

His big leap forward came in 1991 when, at the bottom of the recession, he invested $590m in Citicorp, which merged with Travelers Group seven years later to create Citigroup, the world's biggest bank. Alwaleed's investment in the company soared almost 20 times in value and his 4 per cent stake is now worth $10bn. What he describes as the best financial decision of his life turned him into a business celebrity.

The mere mention of Alwaleed's Kingdom Holdings investing in companies is enough to increase interest in them, yet his stock-picking strategy is surprisingly straightforward. Alwaleed invests in companies that "have a global presence and are facing difficulties, either because of cyclical events, economic downturn or management that isn't solid". He aims for a minimum 20 per cent annual return on any investment.

His secret is investing in brands. "All the companies we are involved in, they were excellent brand names, blue-chip names, but they were facing difficulties. So it was not a hopeless case; they just needed some money, needed some guidance," he says.

Finally, Alwaleed says there has to be a strong management team in place to execute a recovery plan. He lists the hallmarks of good management as "integrity, straightforwardness, openness, having a good strategy and good planning ability".

Like that other great investor Warren Buffett, Alwaleed is there for the long term. "There are some assets I would never sell," he says. "My Citigroup shares will never be sold; my Four Seasons [the luxury hotel group] shares will never be sold; some of my strategic hotels, for example the George V, will never be sold. My News Corporation shares will never be sold and my Time Warner shares will never be sold."

Alwaleed's reasoning in holding on to these shares is that because "the entry barrier is so high" for any would-be competitors, they have their respective markets to themselves.

With an annual income of around $500m from dividends, he reaps huge rewards from retaining his shares. His biggest challenge is finding new opportunities, and in this, he has just 10 close advisers - five of them from Citigroup's private-banking arm - who assist him in his decisions. He is always accompanied by one of them on his travels.

While he emphasises that he prefers people who are critical of his suggestions and do not simply agree with him, Alwaleed has the final word on all his investment decisions.

But all the money and all the best advisers haven't been able to stop him making some mistakes. "With a big portfolio like this, there is no way that all the companies will be all right," he says.

In 1997 Citigroup's shares crashed, taking the value of his holding down by $640m. However, as Alwaleed points out: "These are theoretical hits, because it's a hit only if you sell." He says that if his shares in a company he believes in crash, he never sells, explaining that the best deals can be found straight afterwards: "When there's a panic, I'm always happy."

So while he invested heavily in the dot-com boom, putting money into eBay, Amazon and priceline.com, he then raised his shareholdings after the bubble burst. And in the six months following the 9/11 attacks, he increased his shareholdings in Citigroup and Time Warner by $1bn. Similarly, he has twice saved the troubled Paris theme park operator Euro Disney and is in for the long haul, saying of his 10 per cent stake: "We will not sell it."

He explains: "It's like you have 20 or 30 children. If 19 are doing good and one of them sometimes gets a C in class, you give them private lessons until they make the C a B or an A." He talks with affection of his investments, calling the plaques bearing their logos, mounted on the wall in his office, his "hundred wives".

Alwaleed doesn't want anything to come between him and his trading. He doesn't even sit on the boards of any of the companies he invests in because he doesn't want to be classified as an "insider". He has no ultimate goal, thinking more of people less fortunate than himself.

"If there's any catastrophe in the world, I will contribute," he says, explaining that Islamic law decrees he should give to charity 2.5 per cent "of a certain formula" of his wealth. In fact, it is estimated that he donates more than $100m a year to good causes.

"I believe," he says, "that every person, when God gives them all these blessings, has a responsibility to give back to the world. You can't just stack money - it is not right."

Biography

Prince Alwaleed bin Talal

Age: 55

Background: grandson of Saudi Arabia's founding monarch and nephew of the current king.

Education: BSc in business administration from Menlo College in California, 1979; MA in social science from Syracuse University, 1985.

Marital status: Twice divorced; has a son Khaled, 27, and daughter Reem, 23.

Major investments:

1991: $590m in Citicorp.

1994: $345m in Euro Disney (24 per cent stake); $120m in Four Seasons Hotels (22 per cent stake).

1996: purchased George V hotel in Paris for $185m.

1997: $115m in Apple Computer (5 per cent stake).

2000: $50m in Amazon.com.

2005: purchased Savoy hotel in London for $420m (joint venture with HBOS and Fairmont Hotels).

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