How to Stalk a Billionaire

JOE BAUERNFREUND's fund makes some nice money tagging along behind fat cats like Rupert Murdoch and Vincent Bolloré.

- By William Baldwin

Vulture Capitalist

From his London perch, Joe Bauernfreund finds bones to pick in Japan and South Korea as corporate cross-holdings unwind. One target: Toyota Industries, a machine maker intertwined with Toyota Motors.

In the City of London's investment trust business, dog eats dog. Thus it is that Daniel Loeb, “activist” investor who shakes up torpid corporate managements, found himself under attack from another activist.

Following a shareholder vote on August 14, Loeb pulled off a contentious merger of his London-listed trust with an offshore insurance company that he also controls. But he does not emerge from the fight unscathed. He had to cough up more cash to dissident shareholders than he wanted to.

Leader of the dissidents: Joe Bauernfreund, a soft-spoken British money manager who has a curious specialty. He tracks billionaires, or rather, their holding companies. His vehicle is AVI Global Trust, a $1.6 billion U.K. investment company. This venerable closed-end (inception date: 1889) was created to speculate in Africa’s diamond-rich Transvaal region but in recent decades has redefined itself as a value player.

AVI buys shares of companies trading at discounts to their liquidating value. A few of these are asset-rich operating businesses, not hard to find in Japan (see “Activism Lite,” page 64). The majority are either other investment companies or holding companies controlled by wealthy families.

Bauernfreund’s targets have included entities controlled by the Agnelli family of Italy (whose wealth comes from Fiat and Ferrari), Leon Black (Apollo), the D'Ieteren family in Belgium (Safelite auto glass), France's Vincent Bolloré (Vivendi) and Bernard Arnaud (LVMH), Britain’s Keswick family (Jardine Matheson) and the Murdochs (News Corporation).