Bilan,  December 2000
Olivier Toublan

The impossible almost occurred this year: the Oeri-Hoffman family, who have topped the list of the richest people in Switzerland for the last 11years, was a step away from being dethroned by Ernesto Bertarelli, a 35-year-old “youngun,” boss and major stockholder of Serono, one of the largest and probably the most profitable biotech companies in the world. It’s because Roche’s stock went down by more than 20% in the last tweve months, while Serono pratically tripled in value! What better example than this to illustrate, once again, the strength of the new economy? Moreover, as a consequence, these huge fortunes that were made in the technology, telecommunications, and biotechnology sectors (the celebrated TMT of financial analysts) over the last few months have totally disrupted the very exclusive club of the superrich in Switzerland.

According to our files, there are almost 400 citizens or residents whose fortunes are close to, or more than, 100 million francs.We list the top 300 in a detailed table compiled with the help of Bilanz, which we will publish every December, just like our German partner. This year’s list includes the new “young Turks” who started with nothing, or practically nothing, five years ago and today can hardly count their millions. One example is Daniel Aegerter (1 to 1.5 billion), who sold his e-company Tradex, as well as Albrecht von Müller (700 to 800 million), the head of Think Tools, and Dino Trovato (300 to 400 million) of Datacomm, which he sold to the Italian company, Tiscali. “Old boys” such as Ernesto Bertarelli and André Kudelski (who made just shy of 4 billion francs, about four times more than last year) are now keeping an eye on their billions.

Sure, they both inherited their money, but had enough smarts to know how to increase their fortunes tenfold over the last decade. An unusual feat for people who have inherited a tidy sum. By-the-by, there is an increasing number of heirs on the list who are quite happy to manage their family fortunes with caution. Indeed, exceptions like the Sandoz family foundation, which has cashed in on close to three billion in capital gains thanks to their investments in World Online, are rare.

THE FOUR SECTORS scored on the major trend of 2000, and thus the new economy burst on the scene. And yet, our estimates for October and November are still on the safe side since we learned our lesson when the high-tech stocks bubble burst in the crash of March (Nasdaq dropped 40% from its peak). It’s better this way though, for unless there is a huge surprise, the value of the best stocks in the new economy should not plummet any further. We will likely find that most of the heads of these companies, as well as others, are on our list next December, provided the market makes a comeback. However, the presidents of high-tech companies are not the only ones to have made the most of an exceptional year, with the help of the economic recovery. In French-speaking Switzerland, three other sectors (that we can no longer refer to as the old economy) also made good.

First of all – Watchmaking. This was a crazy year, particularly for the big-name brands that a few international companies snapped up at unprecedented prices. For example, up to eight times the sales figures for Jaeger-LeCoultre, which was purchased by the Richemont group, located in the canton of Zug, after a heated battle. As a result of this high bid, the value of all high-end watch brands went up. And as most of these companies are privately owned, their owners moved up a fair bit on our list. Naturally, there was Nicolas Hayek (3 to 4 billion), who doubled his fortune due in large part to the increase in the price of Swatch shares). There was also Philippe Stern, the head of Patek Philippe, and the Scheufele family who runs Chopard, both of whose fortunes more than tripled to about 1.5 billion francs, according to conservative estimates. Then there are the private banks. Like everywhere else in the world, the number of superrich people is quickly growing (thanks again to the economic boom) and those who manage their money are rubbing their hands in anticipation. Business has never been so good. It goes without saying that commissions are perhaps smaller in wealth management than they are in commercial banking, but they are far more stable.

The major banks have realized this and are buying back the big names in the sector one by one. And since there are only a very few, their value is increasing—to the point where the value of Pictet has increased by several hundred million (the bank is now worth between six and seven billion francs). This is also the case for Darier Hentsch and Mirabaud. We could also add the leisure and sports sector, of which there are three famous representatives living in Switzerland: Bernie Ecclestone (3 to 4 billion) and Patrick McNally (600 to 700 million), who control Formule 1, as well as Michael Schumacher (400 to 500 million), the new world champion. In twelve months, their fortune has increased by 25%. If not more!

Trick question: where do most of these immensely wealthy people live? Zurich? Wrong. In Zug canton? Wrong, again. In fact, billionaires, particularly those who are foreigners, opt for the shores of Lake Geneva, which makes Vaud canton home to 43 incredibly wealthy people whose combined fortunes add up to a total of 77.4 billion francs! In second place is Geneva, with 47 club members who are worth 53.5 billion. Almost the same total for Zurich, but for 60 people. Zug canton is in fourth place, with 15 billionaires whose wealth amounts to “only” 26.9 billion (refer to page 57 for the complete ranking). How can we explain this concentration in French-speaking Switzerland? By the tax conditions, of course, but this doesn’t explain it all. “Otherwise everyone would go to live in Bahamas or Monaco, where taxes are much lower than they are in Switzerland, if they exist at all,” confirmsMr. Micheloud, a consultant from Lausanne who provides strategic solutions to rich foreigners who want to live in our part of the world.

For although Switzerland offers favourable conditions to these people, nothing comes without a price. The celebrated flat-rate is dependent on having an annual taxable income of at least 100,000 francs (at least five times the rental value of a residence), or even more in sought-after cantons such as Geneva. On the other hand, you are not required to declare your annual income or your wealth. You can’t still be actively working to qualify for this flat-rate, but you are allowed to sit on a board of directors.

However, foreigners also appreciate the central location of French-speaking Switzerland and how close it is to the Geneva airport. “In the Bahamas you don’t have to pay any taxes, but it is also ten hours away from London. And there is only one flight per week! The same thing applies to Andorra, which is at the other end of the world, and it’s a three-hour drive to Barcelona,” explains Mr. Micheloud.

Another attractive feature of French-speaking Switzerland is the overall quality of its infrastructure, particularly the healthcare system, which is a critical factor for these people who are often older. The quality of the educational system also plays a part. “These rich retirees are often on their second marrage and when they have children, schools are inevitably brought up.”

A fortune on paper - really?
Another factor that attracts wealthy people to Switzerland is confidentiality. Most very rich people hate being in the spotlight. The majority makes the best of what they consider to be a bad situation, and understand that, in the end, being somewhat transparent works to their advantage (and this also allows us to fine-tune our estimates, which is always difficult to do when the companies are totally privately owned). In any case, with the increased access to financial information and more and more ranked lists such as ours, it is getting progressively difficult to stay in the shadows. In short, the number of reticent individuals who try to use any method (appropriate or not) to prevent their names from being published has greatly decreased in recent years.

On the other hand, there are still just as many people who claim that they are not as rich as we think and that the majority of their wealth is only on paper. Whatever! Scrooge is the only one who wants to live in a giant safe filled with gold coins—others prefer to have real estate, stocks and shares. This makes their fortunes even more volatile, particularly when the market isn’t steady. But, we wouldn’t go so far as to say that their vast holdings are threatened. Only one of the 16 billionaires on our first ranking in 1989 (Werner K. Rey) has fallen off the list (in addition to spending a lot of time in prison). Another lost most of his assets: the Bechtler family who was the primary asset holder of the Zellweger-Luwa company went down with the stockmarket. Most of the others kept accumulating millions, but the grand prize went to the Bertarelli family (Fabio and his son Ernesto), who multiplied their fortune by ten in the same number of years. Second place went to Klaus Jacobs, who multiplied his by six (ironically, he did this by taking over part of Werner K. Rey’s trading of the temping firm Adia).

Whatever the case may be, this uncertainty doesn’t stop the superrich from enjoying their fortunes. Of course, for some (i.e. private bankers, refer to page 108) it is more difficult than for others, but there are many ways (collateral, loans, dividends) they can take advantage of their wealth without selling any of their shares.

At any rate, whether the Oeri-Hofmann family is worth 14 or 30 billion francs does not mean much to us or to them. What matters to them is the fact that they own Roche, the pharmaceutical giant based in Basel. And the available income for family members depends less on the total wealth than it does on the company’s policy on dividends. However, we are not talking about billions here, simply tens of millions (according to our estimates, the family received about 90 million in dividends last year). This sometimes causes a few problems. Take the case of majority shareholder André Kudelski, who would like to stay in that position, when the company does not pay dividends. As soon as the stock began to rise, the Vaud canton boss had a hard time paying his wealth tax! Funny, perhaps, but if entrepreneurs are made to minimize the market value of their businesses, or even sell their shares, in order to pay their taxes, then the situation is worrisome.

At 420 billion, more than the GDP
But they can’t complain too much. With the boost in the economy, the top 300 richest people saw their capital grow by 13.3% this year or the modest sum of 46 billion francs, for a grand total of 420 billion (distributed unequally since 101 billionaires have hold of 83% of it and the top seven have 20%). This 420 billion is almost as much as all the old age pension funds in Switzerland, from which four million workers will eventually receive retirement packages. That’s more than the country’s GDP (gross domestic product).

But this 420 billion doesn’t say much about the real power that these 300 extraordinarily rich people wield. Being the head of Roche does not just mean that someone has a lot of stock, it also, and perhaps especially, means that that person has an influence over hundreds of millions of jobs—directly or indirectly through suppliers— and on the economic prosperity of entire regions as well as on the direction of pharmaceutical research. An enormous social and economic responsability! Moreover, this is a responsibility that justifies our curiosity. People often ask us the purpose of our top 300 rich Swiss list. And the exact reason can be summed up as follows: if only for reasons of health and transparency, a democratic society owes it to itself to know who controls its mechanisms of power.

In politics, there are no problems because those in power always need the support of the people. The economy doesn’t have anything like that. Here, power is calculated through patiently accumulated wealth, which in turn controls capital, workplaces, and production. And bosses don’t have to worry about people voting for or against them. The market alone is their judge. This situation demands a certain amount of transparency. And that justifies the publication of our annual list.

This year, Bilan joined forces with “Bilanz” magazine to publish its usual list of people who are worth more than 100 million francs. In 1989, there were 100. This year, there are more than 400. We were thus forced to cut a certain number of names. Bilan and “Bilanz” lists differ slightly by about 20 people in the category of 100 to 200 million francs. In fact, we have each decided to “Frenchify” or “Germanify” our honor roll slightly. A good 30 journalists from the two editorial teams have been working on the project for more than three months. The authors of the list are: Bruno Affentranger • Ruedi Arnold • Grégoire Baillod • Jörg Becher • Michel Bührer • Luigino Canal • Thierry Combe • Stefan Conradi • Jean-Raphaël Fontannaz • Isabel Garcia-Gil • Stefan Hotz • Franziska Hügli • Vincent Hutter • Alain Jeannet • Peter Knechtli • Marc Kowalsky • Gerd Löhrer • Stefan Lüscher • Medard Meier • Charlotte Michel • Christine Muller • Thomas Müller • Erik Nolmans • Walter Pellinghausen • Bernhard Raos • Guntram Rehsche • Jean-Louis Rey • Nadja Siebenmann • Teresita Solis • Jürg Steiner • Olivier Toublan • Hanspeter Vetsch • Karl Wild

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Bilan is the monthly reference for Swiss company presidents.