This year’s Business Journal list features 16 billionaires with ties to the financial sector, and all but one of them saw double-digit gains in their net worth over the past year.
“It’s a classic case of (those with) money making money,” said Dean Kim, executive director of equity research at William O’Neil & Co., a Playa Vista-based investment advisory firm. “It’s a compounding effect, and this past year it has been gaining speed and acceleration.”
The biggest winner among this group was Antony Ressler, co-founder and executive chairman of Century City-based private equity firm Ares Management Corp. Ressler’s net worth shot up 36% over the past year to $4.9 billion.
Gains above 20%
Gains above 20%
One was George Joseph, the near-centenarian who founded Mercury Insurance 60 years ago and remains Mercury General Corp.’s largest shareholder. Joseph’s net worth jumped 31% to $2.6 billion thanks to a runup in Mercury stock.
The other two were Ray Irani and Jeff Skoll, who each saw their net worth jump 22% over the past year.
Irani, the retired former chief executive of oil giant Occidental Petroleum Corp., has a family office that makes private equity and alternat
Skoll, who made his initial fortune as one of the largest shareholders of eBay Inc., now generates most of his wealth through a hedge fund he set up called Capricorn Investment Group. His net worth shot up to $5.6 billion.
The rising tide of private equity valuations also brought two newcomers to the wealthiest Angelenos list: José Feliciano and Behdad Eghbali, the co-founders of Clearlake Capital Group, a Santa Monica-based private equity firm.
Clearlake’s dealmaking has accelerated in recent quarters, bringing the net worth of each of its founders up to $3 billion.
The only member of this group of 16 financial titans who did not see a double-digit percentage increase in net worth over the past year was Alec Gores, founder and chairman of Beverly Hills-based private equity firm The Gores Group. He had to settle for 6% growth in his net worth to $3.4 billion.
The key to the spectacular net worth growth for these billionaires over the past year has been low interest rates, according to equity research director Kim.
“When interest rates are low, companies do better because they have less financing costs for capital,” Kim said. “Companies can take that money and put it toward the bottom line, which in turn makes the company more attractive from a market perspective. That’s why valuations tend to rise. And if you’ve invested in that company as a private equity player, you will get a higher rate of return from an exit and a higher valuation when you mark to market.”
Low rates pay off
Low rates pay off
Lower interest rates also have been driving the public equity markets to record highs over the past year. That’s one reason Joseph and his Mercury General holdings did so well this past year.
So, what happens when interest rates rise?
“Rising interest rates are definitely one of the biggest risks for private equity valuations,” Kim said.
While that day of reckoning is not yet here, the Federal Reserve Board has indicated it will likely raise interest rates as early as 2023. At that point, it might well be the turn for other sectors represented by the Wealthiest Angelenos to shine.
Keep reading the 2021 Wealthiest Angelenos special edition.
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