A Rothschild Flew the Nest and Still Became Fabulously Rich

(Bloomberg) -- Four decades ago, Jacob Rothschild did something crazy. After a family falling out, he turned his back on the riches of Europe’s biggest banking dynasty to pursue his own interests.

Today, as he plans to retire, the offshoot business he created is marking the latest milestone in the personal fortunes of a banking clan that stretches across France, Switzerland and Britain.

Rothschild and his direct family are the biggest shareholders of RIT Capital Partners Plc, the investment vehicle whose stock returned 7.4% this year through Thursday, boosting his personal wealth to more than $1 billion, according to the Bloomberg Billionaires Index.

A Rothschild Flew the Nest and Still Became Fabulously Rich

Rothschild, 83, announced last month he’s stepping down in September as RIT’s chairman, capping a six-decade career on the front lines of financial markets.

At RIT’s 2019 annual general meeting in London, Rothschild said he and his family will remain significant shareholders, removing the threat of a bulk sale that could hurt the firm’s share price. Succession plans have been in place for several years and Rothschild will remain involved with RIT indirectly.

“It’s changing the guard, but not changing RIT’s philosophy,” said Charles Cade, an analyst at Numis Corp. “Historically, with family vehicles, there’s been a big gap when a lead investor retires, but there’s been a lot of effort here to prevent that from happening.”

Rothschild declined to comment for this story.

Napoleonic Wars

The banking dynasty originates with Mayer Amschel Rothschild, a rare-coin dealer born in 1744 who advised German aristocrats on their finances. He sent his five sons to major European cities to do business with cash-strapped governments, and Nathan Mayer Rothschild was the first to venture abroad when he arrived on English shores at the end of the 18th century.

Nathan founded his namesake bank in 1810 and gained prominence for financing Britain’s military operations in the Napoleonic Wars. About 150 years later, Jacob faced opposition in his efforts to expand the bank’s services from his father Victor and his cousin Evelyn, who took over from Victor as chairman of N.M. Rothschild & Sons Ltd. in 1976. These disagreements helped to spur Jacob Rothschild’s exit.

“The preservation of family control took precedence over expansion,” said British historian Niall Ferguson in his second volume on the Rothschild clan. “It was a serious rift within the English branch of the family.”

Cementing control, N.M. Rothschild & Sons merged seven years ago with the Paris-based bank behind the French branch of the family. The Swiss branch of the clan behind Edmond de Rothschild Suisse SA, meanwhile, aims to take the Geneva-based bank private as part of a plan to expand.

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First known as Rothschild Investment Trust, RIT adopted its acronym upon Jacob’s exit from the U.K. business. Yet the omission of the Rothschild name hasn’t hindered its performance. Since debuting on the London Stock Exchange in 1988 in the wake of the deregulation of the city’s financial markets, the investment trust has grown more than 1,500%, eclipsing the market value of both the Swiss and French Rothschild banks.

A Rothschild Flew the Nest and Still Became Fabulously Rich

“Over a range of asset classes and market cycles, there aren’t many who’ve delivered similar returns in the same period,” Cade said of Jacob Rothschild. “He really looks into the detail. If you’re putting forward a proposal to him, which I’ve done, you seriously have to know your stuff.”

A balanced investment ethos has attracted investors over that span, protecting shareholders in market downturns while delivering long-term growth.

“It’s very much a tortoise rather than a hare,” said Laith Khalaf, senior analyst at U.K. stockbroker Hargreaves Lansdown Plc, which holds an 8.6% stake in RIT. “It’s a good choice for a more conservative portfolio, or it could be used to form the foundation of a long-term portfolio.”

A Rothschild Flew the Nest and Still Became Fabulously Rich

Jacob Rothschild’s reputation is also a powerful pull for investors. Educated at Eton College and University of Oxford, he became a partner in N.M. Rothschild & Sons four years after joining the family bank and ran its corporate-finance department. Along with RIT, he co-founded the FTSE 100 asset manager St. James’s Place Plc and formed part of a trio that joined forces three decades ago in a $21 billion aborted hostile takeover for British American Tobacco Plc.

“RIT is synonymous with Lord Rothschild,” said Alan Brierley, an analyst at Canaccord Genuity Group Inc. “It gives the investor exposure to an almost unparalleled network of contacts. It’s a very powerful brand.”

Even with at least $1 billion to his name, Jacob is far from becoming the richest member of the clan. Within the British branch alone, Nathan built a fortune that would be worth more than 10 billion pounds ($13 billion) today, according to “The Richest of the Rich,” by Philip Beresford and William D. Rubinstein.

The RIT stake from which Jacob and his family benefit rivals the Rothschild clan’s primary $840 million holding in their French bank. Evelyn de Rothschild, 87, sold his shares in the holding company for the family’s banking assets in 2007 for about 200 million euros ($223 million).

A chunk of Jacob Rothschild’s fortune stems from the inheritance he received after the death in 1988 of his distant cousin, Dorothy. Then worth 76 million pounds, it formed part of Britain’s largest will at the time, according to a 1990 article by the Spectator, a political magazine. It also gave him responsibility for running Waddesdon Manor, a 19th century country house built by one of his many wealthy ancestors -- Baron Ferdinand -- to display his art collection.

A Rothschild Flew the Nest and Still Became Fabulously Rich

Jacob Rothschild oversees the manor through a charity, which had net assets of 655 million pounds at the end of February 2018, according to U.K. Companies House filings. These assets, including a stake of almost 10% in RIT, are excluded from Bloomberg’s calculation of his personal wealth. The family’s stake held outside the trust is attributed to him to reflect his status as founder.

James Leigh-Pemberton, 62, will become RIT chairman when Rothschild steps down. The son of a former Bank of England governor, Leigh-Pemberton now holds the same title at the U.K. Treasury unit set up in 2008 to manage stakes it took in ailing British banks following the global financial crash.

RIT holds its next general meeting in April 2020, the month of Jacob’s 84th birthday, when he will join fellow investors in the audience. With daughter Hannah -- the oldest of his four children -- on RIT’s board for the past six years, this offshoot of the Rothschild house is set to add more riches to the banking clan, and its other shareholders.

“His influence will still be there after he steps down,” Brierley said. “RIT has become a core holding for a lot of investors who feel very comfortable with it. He’s built an incredible investment vehicle.”

©2019 Bloomberg L.P.